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TheStreet Open House

Bulls Want a Lift From Allergan

By David Russell, reporter at OptionMonster

NEW YORK -- Option traders are finding a new favorite in Botox maker Allergan (AGN)

OptionMonster's tracking systems detected the purchase of 2,530 April 95 calls for $4.62 and $4.673. Volume was more than 34 times previous open interest at the strike.

Calls lock in the price investors must pay to buy shares, so they can result in some big profits in the event of a rally. That leverage has already been at work in the name because last week investors bought the October 92.50 calls for 90 cents and 95 cents. At the time, AGN was trading for $92.80.

The stock then inched higher and closed Monday up 1.39% to $93.54. That was a gain of less than 1% from last week's levels. Those October calls, however, inflated by more than 40% to $1.30 from the same move.

Allergan has been trending higher for years but typically sees fewer than 1,000 options trade per session. The recent activity suggests that it's now being discovered by a new group of investors hoping to leverage its bullish momentum. The company's next earnings report is scheduled for Oct. 30.

Calls outnumbered puts by more than 8 to 1 Monday.

Russell has no positions in AGN.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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