Mylan N.V. (MYL) Mobbed By Call Buyers

Mylan NV (MYL) option buyers are changing their tune

Apr 8, 2015 at 1:19 PM
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Option bulls are bombarding Mylan NV (NASDAQ:MYL) this afternoon, cheering the company's bid for drugmaker Perrigo Company plc (NYSE:PRGO). At last look, MYL was 13.8% higher at $67.76 -- and earlier touched a record high of $69.45 -- and option players are rolling the dice on even higher highs soon.

The equity's 30-day at-the-money implied volatility has spiked 30.3% to 46.5% -- in the 99th percentile of its annual range. Meanwhile, MYL calls are trading at nine times the average midday clip, and have nearly tripled puts thus far. Most active are the July 70 and April 65 calls, which have seen notable buy-to-open activity. "Vanilla" option bulls are buying the contracts to open to bet MYL will topple or continue its advance above the strikes by the respective expiration dates of Friday, July 17, and Friday, April 17.

In light of MYL's surge, delta on the July 70 call more than doubled overnight, to 0.48 from 0.22, implying a roughly 1-in-2 shot of expiring in the money. Delta on the now in-the-money April 65 call skyrocketed to 0.66 from 0.12 at yesterday's close, suggesting about a 2-in-3 chance of finishing in the money.

Today's preference for Mylan NV (NASDAQ:MYL) calls marks a significant change of pace, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.93 stands higher than 97% of all other readings from the past year, suggesting option buyers were picking up MYL puts over calls at a near-annual-high clip during the past two weeks. Should those bears hit the exits, MYL could enjoy additional tailwinds.

Hourly Chart of MYL since March 24, 2015
 

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