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Call Volume Gains Momentum on Boston Scientific

But some of this call activity on BSX may be bearish in nature

by 1/9/2012 2:32 PM
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Boston Scientific Corporation (BSX - 5.30) call volume is on the rise today, as more than 7,600 of these options have changed hands so far, representing eight times the equity's expected intraday volume. Most of the action has occurred at the near-the-money January 2012 5 strike, where at least 4,060 calls have been traded -- more than half of them at the bid price, suggesting they were sold. This option currently holds open interest of 8,496 contracts, so it's difficult to say for sure whether new positions are being opened here today. If some of these calls are being sold to open, speculators are wagering that the stock will finish below $5 by front-month expiration.

This preference for calls over puts is nothing new for BSX. In fact, the Schaeffer's put/call open interest ratio (SOIR) stands at 0.58, indicating that calls nearly double puts among options set to expire within three months. This ratio ranks in only the 12th percentile of its annual range, confirming that near-term options players have been more optimistically oriented toward the stock just 12% of the time during the past 12 months.

However, the majority of analysts following the medical equipment manufacturer seem to feel lukewarm, at best, toward BSX. According to Zacks, just six "buy" or better ratings have been doled out, compared to 19 "holds" and one "strong sell."

Examining BSX's technical performance, the equity has underperformed the broader S&P 500 Index (SPX) by 11.5% during the past 40 sessions. On the charts, the stock appears to be testing its 10-week moving average, which -- along with its 20-week trendline -- acted as stubborn resistance for the majority of 2011. In the afternoon hours of the session, BSX remains nearly flat with Friday's close of $5.30.


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