Allergan, Inc. option volume surges on buyout speculation

On the put side, investors added new positions at AGN's April 40, April 45, May 40, and May 45 strikes. Most active was the May 40 option, which saw open interest swell overnight by 5,712 contracts. Total open interest on this out-of-the-money put now stands at 5,738.

By contrast, the stock's April 50 and April 55 calls were far and away the most popular bullish options. Open interest at these out-of-the-money calls surged by nearly 9,000 contracts apiece overnight. The April 50 strike is now home to peak front-month call open interest of 13,190 contracts.

In today's trading, option volume has quieted down after brokerage firm Natixis Bliechroeder threw cold water on the buyout speculation. The firm noted that AGN is unlikely to accept a bid below the mid-to-upper $60s, which means the offer price may exceed a quarter of GSK's market cap.

At last check, AGN was down approximately 1.7%. If the stock continues to retreat, it will likely endure its fourteenth consecutive monthly close below resistance from its 10-month moving average.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.