Put Trader Bags Huge Profit from Sliding Valeant Stock

VRX has closed lower in six straight sessions

Oct 19, 2017 at 2:37 PM
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Shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) have been sliding in recent days, falling below their 200-day moving average to trade at $12.38. In fact, if the shares closed lower today, it would mark their seventh straight loss. The sell-off was apparently good news for one VRX options trader, who seemingly just cashed out a major bearish position for a big win.

At last check, more than 130,000 Valeant puts had traded, compared to an average daily volume of just 15,000. Trade-Alert is citing the closing of a huge put spread involving 46,178 November 11 and 14 puts, which was seemingly opened back on Oct 3, when VRX stock was trading near $14.60. If that's the case, this options bear just made off with a cool $4 million profit from this trade.

There are still plenty of other Valeant bears. Short interest remains elevated, accounting for almost 12% of the stock's float. However, these bearish bets fell by almost 8% during the past two reporting periods.

This skeptical view is shared by analysts. Of the 11 brokerage firms tracking VRX, eight say it's a "hold" or "strong sell." Interestingly, though, its average 12-month price target stands well overhead at $16.71.

While VRX shares are currently pacing for a slim victory, a short-term bounce may have been expected. That's because the equity's 14-day Relative Strength Index (RSI) closed yesterday at 32 -- just outside of oversold territory.

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