Allergan Options Attract Bullish Traders

OptionMonster co-founder Pete Najarian provides options picks Monday, Wednesday and Friday in TheStreet.com's Deep in the Money Calls newsletter.

Mike Yamamoto, managing editor of OptionMonster.

IRVINE, Calif. (TheStreet) -- Allergan(AGN Quote) is drawing heavy trading in upside options amid rumors that the Botox maker may be a takeover target.

Traders are focused on the September 60 contracts, where more than 5,000 calls have changed hands today at roughly 2.5 times the previous open interest, according to OptionMonster's real-time tracking systems. At least 80% of the calls were traded in a strong buying pattern, most of them for $1.30 to $1.40, indicating new bullish positions.

Calls have averaged only 102 contracts per day at the September 60 strike in the last month. For the calls purchased today to turn a profit, Allergan's shares would need to be above $61.30 by the time the options expire, near the stock's 52-week high of $61.72.

Allergan is up slightly today to $55.57 near levels not seen since last September. The stock was trading around $45 as recently as mid-July but rose sharply in the weeks leading up to the medical company's earnings report Friday. Those quarterly results and its outlook led a William Blair analyst to upgrade the stock yesterday.

More than 10,500 calls have traded at all Allergan strikes so far today, outnumbering total puts by more than 27 to 1.

-- Reported by OptionMonster's Mike Yamamoto in New York.