By Mike Yamamoto of OptionMonster
Option traders are turning bullish on Express Scripts (ESRX).
OptionMonster's tracking systems detected the purchase of about 3,700 May 70 calls Wednesday, most of them for $3.10. Open interest in the strike was 1,172 contracts before the trades appeared, indicating that this is fresh buying.
These calls lock in the price where the stock can be purchased, letting investors cheaply position for a rally and potentially generating significant leverage if one ensues. But the options will expire worthless if shares remain below $70 through mid-May.
Express Scripts' shares rose 0.8% to $67.18 Wednesday. The health-benefits company gapped down to the $60 level after its last earnings report on Oct. 24 but immediately bounced off its 200-day moving average and then erased those losses. Shares hit a lifetime peak of $67.95 last Friday but have drifted lower since.
Total option volume was slightly above average, with calls outpacing puts by a bullish 5-to-1 ratio.
Yamamoto has no positions in ESRX.