Can Mylan Inc. (MYL) Take Out $60?

Mylan Inc (MYL) is soaring, and option traders think it's just the beginning

Jan 26, 2015 at 1:47 PM
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Generic drugmaker Mylan Inc (NASDAQ:MYL) is up 4.1% at $56.45, and is seeing some serious volume, after the firm said it expanded its contract to manufacture and distribute partner Gilead Sciences, Inc.'s (NASDAQ:GILD) hepatitis C treatments. MYL's 30-day at-the-money implied volatility has popped 8.1% to 29.1%, and call volume is running at twice the average intraday pace, pointing to a growing demand for short-term bullish bets.

Specifically, it looks like buyers are circling the February 60 call, purchasing the contracts to gamble on a rally north of $60 -- and into record-high territory -- by the close on Friday, Feb. 20, when the options expire. In light of MYL's jump, delta on the call has skyrocketed to 0.22 from 0.086 at Friday's close, suggesting about a 22% shot of expiring in the money.

Today's affinity for long calls is just more of the same for MYL, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 11.09 stands higher than three-quarters of all other readings from the past year. In other words, option buyers have been more call-focused than usual during the past two weeks.

It's worth noting, though, that short interest represents more than two weeks' worth of pent-up buying demand, at MYL's average pace of trading. Against this backdrop, some of the recent call buying -- especially at out-of-the-money strikes -- could be attributable to short sellers looking for an options hedge.

On the charts, Mylan Inc (NASDAQ:MYL) has taken a breather since touching an all-time high of $59.60 on Nov. 28, and is currently battling its 10-week moving average, currently located in the $26.50 vicinity.

Weekly Chart of MYL since July 2014 with 10-Week Moving Average
 

 

 

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