Options Volume Spikes on Sinking Perrigo Stock

Day traders are targeting the December 45 call

Dec 21, 2018 at 2:44 PM
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Perrigo Company (NYSE:PRGO) said it has been ordered by Ireland to pay $1.9 billion in back taxes for 2013. The bill comes after it was found that intellectual property sales of Elan Pharma -- which Perrigo acquired in 2013 in a corporate tax inversion -- were taxed incorrectly. In reaction, PRGO stock is down 26.5% to trade at $38.47, earlier hitting a nine-year low of $38.13.

This negative price action is nothing new for the over-the-counter pharmaceutical firm. Today's drop puts PRGO shares on track for their seventh straight loss, the longest daily losing streak since October 2017. Plus, the equity is pacing for a 45.8% quarterly loss -- its worst on record -- and has shed 55.9% year-to-date.

prgo stock daily price chart on dec 21

Perrigo options are flying off the shelves today, with around 6,500 calls and 2,000 puts on the tape, 15 times what's typically seen. Eleventh-hour traders are targeting the December 40 calls, where at least some of the activity appears to be of the buy-to-open kind.

Other speculators may be initiating new positions at the February 45 call, though there appears to be a mix of buying and selling occurring. Those purchasing the calls expect PRGO stock to climb back above $45 by February options expiration, while those writing the calls are betting the strike will serve as a short-term ceiling.

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