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Several stocks, including Mylan (NASDAQ:MYL), have reached multiyear highs, prompting traders to attempt to capture gains with hedged plays like the diagonal spread.

The pharmaceutical company MYL is up 1 percent on the day, trading at $23.14, its highest level since April of 2006. Shares have more than doubled in the last 10 months and are up 25 percent in the last month alone.

optionMONSTER's systems picked up the purchase of 4,000 of the October 25 puts for $2.90 and, at the same time, the same number of the May 21 puts sold for $0.25. The open interest at both strikes was less than 100, so these were both new opening positions.

This "diagonal" spread has a bearish bias to it, as it will take a maximum profit if shares fall to $21 by expiration. There is also a volatility aspect to it, as the trader bought implied volatility at 25 percent for the October puts and sold it at 30 percent for the May puts.

The diagonal spread strategy limits potential loses if MYL climbs higher.

Disclosure: No positions

Source: Diagonal Spread in Mylan Has Bearish Bias