Valeant Stock Bull Gap Sparks Heavy Options Trading

Bulls expect the stock to close the week at levels not seen since January

May 8, 2018 at 11:42 AM
facebook X logo linkedin


Shares of Valeant Pharmaceuticals Intl Inc (NYSE:VRX) are surging today -- up 15.9% to trade at $21.05, and on track for their best day since Nov. 7 -- after the drugmaker reported stronger-than-forecast first-quarter adjusted profit and sales, boosted its full-year revenue forecast, and said it is changing its name to Bausch Health Companies Inc (BHC), effective July 2018. Options traders are climbing on for the ride, too, and most are betting on bigger short-term gains.

At last check, roughly 73,500 calls and 32,500 puts have traded on VRX stock -- 10 times what's typically seen at this point in the day, and volume pacing in the 99th annual percentile. Most active is the weekly 5/11 21-strike call, where it looks like new positions are being purchased for a volume-weighted average price of $0.49. If this is the case, breakeven for call buyers at this Friday's close is $21.49 (strike plus average premium paid).

Earlier today, VRX shares topped out at an intraday peak of $21.28, and haven't notched a weekly close north of $21.49 since Jan. 19, with this level corresponding to the equity's late-January bear gap. However, the stock's recent trajectory has been higher amid relatively low-volume trading, with Valeant up more than 41% from its early April lows near $15. The shares are also trading back above their 100-day trendline, which has kept a tight lid on VRX since a Feb. 28 sell-off.

vrx stock daily chart may 8

Should Valeant extend today's upside, a continued round of short covering could help keep the wind at the stock's back. Although short interest declined 14.6% in the most recent reporting period, there are still 22.32 million VRX shares sold short -- or nearly four times the stock's average daily pace of trading.

Plus, analysts have yet to react to today's VRX bull gap, and a round of positive brokerage notes could draw more buyers to the table. Of the 12 analysts covering Valeant Pharmaceuticals, seven maintain a "hold" or "strong sell" rating, while the average 12-month price target of $17.12 is a roughly 18% discount to current trading levels.

 

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls

 
 
 


 
 

Rainmaker Ads CGI