Valeant bulls double their money

Vrx510

Upside option positions posted big gains with today’s rally in Valeant Pharmaceuticals.

On May 2, Investitute’s tracking systems identified the purchase of 7,200 July $10 calls for $1.30 to $1.72 with shares at $10.26. Volume was well above the strike’s open interest of 4,524 contracts, indicating that this was fresh buying.

Today those calls traded for $3.52, more than doubling in value. The stock has gained 31 percent in that period, an impressive move but still one that pales in comparison to that of the options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

VRX rose 6.44 percent today to close at $13.47. The drug maker rallied this morning after announcing that billionaire hedge-fund manager John Paulson had joined its board.

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Mike Yamamoto

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