By Jud Pyle, chief investment strategist for the Options News Network
Shares of medication manufacturer
have hovered around $48 after a major selloff on Feb. 27. Big option volume today suggests that at least one investor could be betting Baxter stock will climb higher than $52 at November expiration.
In mid-day trading, an investor bought 8,000 Nov. 52.5 calls for around $2.32 and sold 8,000 Nov. 60 calls for about 55 cents with the stock around $49. That means this investor paid $1.77 for this trade. This investor also sold 8,000 Nov. 42.5 puts at $1.70.
After paying $1.77 for the call spread and collecting about $1.70 on the puts, the customer paid 7.5 cents in total for the trades. The Nov. 42.5 puts are home to current open interest of 180. The current open interest of the Nov. 52 calls is 175 while the current open interest of the Nov. 60 calls is 423.
An interesting thing to keep in mind is Baxter stock seems to have found a range. These shares dropped down to around $50 from the $60 level in February. On April 6, Baxter shares bottomed out at $47.21, but also sank to $48.57 on March 11 and $48.07 on April 24. Baxter stock also hasn't climbed higher than $55 since Feb. 24. Baxter shares are currently down 10 cents to $48.59.
Normal daily volume for Baxter options is around 5,400. More than 25,000 Baxter options have changed hands during the first half of the trading day. News that Baxter, along with other vaccine providers including
, has plans to produce an injection that protects people against the H1N1 flu strain might have boosted volume and sparked confidence in at least one bullish investor today.
Jud Pyle is the chief investment strategist for Options News Network and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."