Bullish Move in Cardinal Health: Options

By Jud Pyle, CFA, chief investment strategist for the Options News Network

CHICAGO (TheStreet) -- Newly traded Cardinal Health(CAH Quote) spurred some bullish options activity Wednesday.

Cardinal Health, which recently completed a spinoff to shareholders of CareFusion(CFN Quote), began trading on its own on Sept. 1 without CFN shares.

A customer initially bought the Oct. 25 calls 15,000 times today, and then turned around to sell 15,000 of the older Sept. 35 calls, which also called for the delivery of half a share of CFN. The customer sold the Sept. 35 calls for around $1.75, and paid about $2.57 for the October calls.

The simplest explanation for this trade is the investor sold to close the Sept. 35 calls and rolled out for exposure in the October calls. The open interest in the Sept. 35 calls is currently 19,079 contracts, which is why it is quite possible that that this customer is selling to close.

On some price charts, it may appear that CAH has fallen in the past week, from the mid-$30's, to the high-$20's. But that is the result of receiving 50 shares of CFN for every 100 shares of CAH held. Half of the current CFN price is roughly $9.30. When you add that to the current CAH price of $27, you get a price of $36.30.