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Call Spread on VRX on 11/12/2015

Possible Support on VRXValeant Pharmaceuticals International, Inc. (VRX) develops, manufactures, and markets pharmaceuticals, over-the-counter products, and medical devices worldwide.

The company offers Solodyn to treat red and pus-filled pimples of acne in patients, as well as Ziana, Acanya, Atralin, Retin- A Micro, and ONEXTON gel; Wellbutrin XL for major depressive disorder in adults; Jublia for onychomycosis of the toenails; Xenazine for chorea; Targretin for Cutaneous T-Cell Lymphoma; Arestin, a subgingival sustained-release antibiotic; and PROVENGE for the treatment of prostate cancer. It also provides Zovirax, an antiviral for recurrent herpes labialis and initial genital herpes; Syprine to treat patients with Wilson's disease; Elidel to treat atopic dermatitis; Prolensa for inflammation and pain following cataract surgery; Duromine, a weight loss drug; and Lotemax gel for post-operative inflammation and pain. In addition, the company offers PreserVision, an antioxidant eye vitamin and mineral supplement; CeraVe to rebuild and repair the skin barrier; ReNu Multiplus to lubricate and rewet soft contact lenses; Biotrue for healthy contact lens wear; Ocuvite, a lutein eye vitamin and mineral supplement; Boston, a cleansing solution for gas permeable contact lenses; Artelac to treat dry eyes; AntiGrippin for acute respiratory and respiratory viral diseases, and influenza; and Bedoyecta, a vitamin B complex product.

Shares have sold off sharply over the past few days and weeks on allegations of improper dealings between the company and one of its subisdiaries that dispenses the company's produtcts. The reports have pushed the shares down to $73 level. Shares have traded as high as $260 a few months ago. The Company will have a presentation next week that we anticipate will lead to a short covering rally in the shares. 

We are recommending a call spread to limit our exposure. If you are a risk taker look at buying the $75 calls only.

Trading November 19, 2015 options

Last Trade: $75.44

52-Weeks Trades: $73.32 - $263.81

Trade

  • Buy 1 November $75.00 Call at $4.50
  • Sell 1 November $80.00 Call at $2.35
  • For a net debit of $2.15

Profit/Loss Analysis

  • Breakeven at $77.15
  • Maximum profit is $285.00 at strike of $80.00
  • Maximum loss is ($215.00) at strike of $75.00

Closing Summary

  • Sold 1 November $75.00 Call at $4.00
  • Bought 1 November $80.00 Call at $1.00

Position closed on 11/19/2015 at price of $3.00 with a 39.53% gain in 6 days.

Updates

11/19/2015 10:54:33 AM

Taking profits on VRX Call Spread. They expire tomorrow.

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