Option Traders Looking for Profits, Not Just Clearer Vision

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  • Bausch Health Companies Inc (BHC) produces and sells pharmaceutical, medical device and over-the-counter (OTC) products used for eye health, gastroenterology and dermatology. If you have contacts, it’s hard to avoid their products for lens care.

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  • The company is working on potential treatments for COVID-19. They have an antiviral nebulizer called Virazole that is intended to help with respiratory distress. The product is in clinical trial in Canada. They’re also working toward clinical trials in the U.S. of Xifaxan. This drug is intended for gastrointestinal distress and pulmonary compromise associated with COVID-19.

    Over the past week, option traders and insiders have been migrating toward BHC. On May 12 through May 14, John Paulson, director at BHC, bought 5 million shares, increasing his position by 25%. On Monday, option traders began to buy 22 MAY 20 $18 calls for as much as $0.27, and then on Tuesday began buying the 29 MAY 20 $18 calls for around $0.65. The option activity on Tuesday was over four times the average with 42% occurring at the ask price.

    Action to Take: BHC is a long opportunity with a near-term price target of $24.

    Speculators may want to consider the 17 JUL 20 $17 call option for around $2.30 or less. The option will be worth $7 if the price is at $24 by expiration for over a 300% ROR. Consider rolling that strike to a higher strike price with a 0.60 to 0.70 delta if the option delta goes from 0.65 to 0.80. This process allows you to remove risk and eventually lock in gains as the price continues to advance.

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