Traders Bet on More Novartis Upside

Dec.16.10 | About: Novartis AG (NVS)

By David Russell

A day after Novartis (NYSE:NVS) gapped higher, the bulls are looking for the Swiss drug maker to surge to new highs.
NVS

optionMONSTER's Heat Seeker tracking system detected the purchase of about 13,000 April 60 calls for $1.85 and the sale of 13,000 April 50 puts for $1.05. Total option volume in the stock is more than 14 times greater than average so far today.

NVS is down 0.25 percent to $58.84 in late morning trading. Yesterday it leapt 6 percent after finalizing a deal to buy eye-care company Alcon and announcing it would resume a $10.3 billion stock buyback.

Today's option trade cost $0.80 and will resemble a long position in the stock, but with relatively little downside risk: It will generate profit if NVS rallies over $60 and not lose any money unless the stock falls below $50.

NVS has been trapped below $60 since late 2006. If it breaks that level, investors may expect a prolonged rally.

Disclosure: No position