Bulls charge into Valeant Pharma

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Bullish option traders are piling into Valeant Pharmaceuticals as its shares reach all-time highs.

OptionMonster's tracking systems detected the purchase of about 2,100 October 105 calls yesterday, led by a large print of 1,355 contracts that went for $3.35. Volume was more than 9 times the previous open interest at the strike, indicating that this is fresh buying.

Calls lock in the price where shares can be purchased, offering potentially significant leverage in a rally. Investors also use these options to limit the amount of capital at risk if the shares reverse lower. But the Valeant calls bought yesterday will expire worthless in mid-October if the stock remains below the $105 strike price.

Valeant rose 4.19 percent to $101.68 yesterday, a new lifetime closing high. It had spent most of June at support around $84 but then started moving last month and gained 2 percent on Wednesday as strong demand in emerging markets prompted management to raise guidance.

Total option volume in the session was more than triple its daily average for the last month, with overall calls leading puts by 4,200 to 1,700.

—By CNBC Contributor Mike Yamamoto

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Mike Yamamoto is managing editor for OptionMonster. Yamamoto has no positions in VRX.