On Sept. 16 I recommended Buy to open the January 20, 2017 call on Mylan (MYL) with a strike price of $45 at $1.90 or lower. Symbol (MYL170120C45). 

Since that recommendation Mylan hit more rough waters. However, Mylan bounced 8% on Monday on the heels of a $465 million settlement with the Department of Justice relating to the potential mis-classification of EpiPen in the Medicaid Drug Rebate Program.

This is big news and the speedy resolution of this controversy should move the stock higher. The stock has been hammered as investors feared the worst regarding a draconian response from the government.

The company also lowered 2016 estimates by just 20c to account for the generic EpiPens that it launched. This is much less than investors had feared. Management is sticking with its 2018 estimate for $6 in earnings.

The January 45 calls are down more than 50% from our purchase price. But I recommend holding on to them as Mylan should move higher as the market focuses on future earnings. At $40 the stock trades at a rock bottom PE of 8 on current earnings and 6 on future earnings.