What's behind big call activity in Teva

Teva Pharmaceuticals is seeing large call activity, but the strategy behind the trades is unclear.

TEVA is up 0.55 percent at $42.42 after trading as low as $41.52 in the morning, its lowest level since gapping higher on the first day of the year. Shares were trading above $46 last week.

Topping the option volume so far today is a large call spread, according to optionMONSTER's systems. A trader bought 8,720 September 47.50 calls for $0.57 at more than twice the open interest at that strike, so it was a new opening position. Seconds later he or she sold 8,720 September 50 calls for $0.23 against open interest of 16,872.

This is one of two types of trades, depending on whether the action at the higher strike was done to open or close a transaction. If is was an opening position, then this is simply a new vertical spread with the trader paying $0.34 for exposure up to $50.

If the selling was to close, then the trader was selling the long calls at the higher strike and rolling the position down to the lower contracts for nearer and more exposure. (See our Education section)

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