The Cooper Companies (COO) shares have been hammered recently, but Friday's options order flow seems to reflect expectations for a massive rebound in shares of the Pleasanton, CA medical supplies company. Shares edged down $1.19 to $57.06 today and have given up 31.5% from the 52-week highs seen two months ago. The stock gave up 12.8% on November 15 following news of a recall of contact lenses.

In options action, one player seems to view the recent decline as a buying opportunity and bought a hefty call spread on the stock Friday. With COO around $57 per share, 9,000 May 60 calls were bought on the stock for $6.20 while 9,000 May 80 calls sold at $0.65 per contract. A source at the options exchange confirms that the spread was bought for $5.55 and today's open interest data indicate a new position was opened. May 60 and 80 calls are now the largest positions in the options on the stock. The spread will offer a potential $14.45 payoff if shares settle above $80 (+40.4%) through the May expiration. The breakeven of the spread at expiration is $65.55 per share and 15% above current levels.

On November 16, Morgan Keegan analysts came to the defense of the company and said the recent decline is "overdone." The firm notes that the Avaira Sphere contact lenses, which were the subject of the recall, don't even represent 1% of the company's total sales. The firm did lower its price target to $75 from $88. However, they believe "margin expansion opportunity remains intact." The big call spread in COO Friday might also be a play on the stock rebounding through mid-2012.

I'm not initiating this spread yet given the poor market conditions lately, but I am adding COO to my list of stocks to watch for upside trading opportunities in the weeks ahead. Prior to the recent decline, the stock had rallied more than 500% since late-2008, following a series of better-than-expected earnings reports. The stock might find a floor and begin to rally again when results are next announced on December 8.

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.