Double Dose of Bad News Brings Out Mylan NV (MYL) Bears

Mylan NV's (MYL) latest bad day has options traders scooping up puts

Sep 2, 2016 at 2:41 PM
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Mylan NV (NASDAQ:MYL) put options are popping, as the biotech stock sinks on Hillary Clinton's warning to price-gouging pharmaceutical firms. Making matters worse, a pair of Congressmen sent a letter to the Department of Health and Human Services to see if the EpiPen was misclassified under the Medicaid program. At last check, MYL shares are down 4.5% at $40.03.

As alluded to, the stock's put options are in high demand, being exchanged at eight times the usual intraday pace. It looks like eleventh-hour bears are buying to open the weekly 9/2 40-strike put, hoping MYL will breach the round-number $40 level by this evening, when the series expires. Similarly, one slightly longer-term trader may have liquidated a block of 3,000 September 44 puts to help fund the fresh purchase of 5,000 September 41 puts. By rolling down the strike, this speculator is anticipating extended losses through front-month expiration, at the close on Friday, Sept. 16.

By no means are these the only traders to bet bearishly on MYL of late. The stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has risen to 1.39 from 0.32 over the past two weeks. In other words, speculators have turned much more skeptical lately, even as short sellers have jumped ship.

Technically speaking, Mylan NV (NASDAQ:MYL) hasn't done much to disprove its doubters. Since its most recent highs in the round $50 neighborhood, the biotech stock has surrendered roughly one-fifth of its value, and is on track for its lowest closing price since mid-May.

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