Valeant Pharmaceuticals Intl Inc (VRX) Put Volume Pops After Fraud Accusations

Valeant Pharmaceuticals Intl Inc (VRX) puts are hot after a chilling Citron Research report

Oct 21, 2015 at 11:38 AM
facebook twitter linkedin

Valeant Pharmaceuticals Intl Inc (NYSE:VRX) shares are plummeting -- and were temporarily halted -- on a devastating short-seller report. The stock was last seen roughly 24% lower at $111.50, and earlier touched a two-year low of $98.35. Against this backdrop, the stock has landed on the short-sale restricted list, and option bears are blitzing the biotech.

At last check, roughly 65,000 VRX puts have changed hands -- 10 times the average intraday put volume, and nearly twice the number of VRX calls exchanged. The equity's 30-day at-the-money implied volatility has spiked to a fresh 52-week high of 144.70%, more than doubling from yesterday's close.

Most popular thus far is the weekly 10/23 95-strike put, which has garnered a healthy amount of what looks like buy-to-open action. By purchasing the puts at a volume-weighted average price (VWAP) of $3.94, the buyers will make money if VRX sinks beneath $91.06 -- territory not explored since mid-2013 -- by Friday's close, when the options expire. Delta on the put sat at zero yesterday -- when the contract was even deeper out of the money -- but has surged to negative 0.23 today, implying a 23% chance of expiring in the money.

Even before today, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was under fire for its drug pricing. As alluded to earlier, the equity's foray into double-digit territory today was prompted by a report from Citron Research -- "Valeant: Could this be the Pharmaceutical Enron?" -- which accused the company of fraud and a "cover up." 

Minimize Risk While Maximizing Profits

There is no options strategy like this one, which consistently minimizes risk while maintaining maximum profits. Perfect for traders looking for ways to control risk, reduce losses, and increase the likelihood of success when trading calls and puts. The Schaeffer’s team has over 41 years of options trading success targeting +100% gains on every trade. Rest assured your losses are effectively limited to your initial cost at the time of making your move! Don't waste another second... join us right now before the next trade is released! 


300x250 - Banner 3 - v1