Perrigo trade has bullish prescription
Perrigo sells over-the-counter drugs, but one trader has a bullish prescription for the shares.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 May 175 calls for $4.80 and the sale of an equal number of May 15 puts for $2.80. Volume was more than 30 times open interest at both strikes, which indicates new money was put to work.
The strategy is tailored for a breakout to new highs, possibly around the release of quarterly results in early May. The long calls ensure they won't miss a rally above $175, while the short puts will force them to buy stock if it drops to $145. (See our Education section.)
PRGO fell 0.27 percent to $165.92 yesterday, and is pulling back from an all-time high of $174.65 last week. It also bounced above $145 in February, which could make chart watchers comfortable it won't fall much below that level.
The benefit of the combination trade is that it costs just $2 up front and will only commit them to owning stock if it breaks out of the range. Should the stock remain between $145 and $175 by the third Friday of May, both legs will expire worthless.
Total option volume was 20 times greater than average in Tuesday's session, according to Heat Seeker.
More From optionMONSTER
