Allergan Recall Doesn't Scare This Option Bull

The shares of Allergan plc (NYSE:AGN) are getting crushed today, after the company pulled its textured breast implants from the market in Europe. Late yesterday, France's regulatory body issued a recall request for the implants, saying they've been linked to a rare type of cancer. There is no evidence that women who have the implants are facing immediate health risks, and the textured implants will remain available in the U.S., Allergan said. Against this backdrop, AGN shares are down 7.3% to trade at $135.99 -- and earlier touched a new low -- yet at least one options trader is paying big bucks to bet on a first-quarter recovery.

Allergan stock fell as low as $135.51 in intraday trading, into territory not charted since late 2013. The security is on pace for its worst session since Oct. 30, when AGN dropped after earnings and when the company's CEO expressed disappointment in early buyer interest for its women's health and infectious diseases units. From a longer-term perspective, the healthcare concern has been in a channel of lower highs and lows since peaking in mid-2015.

AGN options are flying off the shelves today, with about 12,000 calls and an equal number of puts traded -- six times the average intraday volume. In fact, overall options volume is pacing for an annual high.

Of note, the March 150 call is far and away the most active option so far today, with roughly 5,900 contracts exchanged. Most of that activity is attributable to a sweep of 4,000 calls that appear to have been bought to open for $5.20 apiece this morning. If it's a "vanilla" buyer, the trader paid a cool $2.08 million ($5.20 x 100 shares per contract x 4K contracts), and the calls will begin to profit if AGN shares retake $155.20 (strike plus premium paid) by the time March options expire.

Today's appetite for bullish bets runs counter to the recent trend seen on the major options exchanges, though. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.84 is in the 90th percentile of its annual range. While the ratio tells us that long calls have outnumbered puts on an absolute basis, the high percentile indicates a much healthier-than-usual appetite for bearish bets of late.