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Boston Scientific Lured Last-Minute Option Bulls Ahead of Earnings

However, BSX confessed to weaker-than-expected 4Q revenue

by 2/2/2012 9:09 AM
Stocks quoted in this article:

Ahead of its turn in the earnings confessional this morning, Boston Scientific Corporation (BSX - 6.09) saw a spike in call volume. However, those last-minute option bulls are likely shaking their fists today, with the medical devices maker poised to open lower after confessing to weaker-than-expected fourth-quarter revenue.

Specifically, the firm said fourth-quarter earnings fell a year-over-year 55% to $107 million, or 7 cents per share. Excluding items, per-share earnings dropped to 13 cents, topping Wall Street's forecast of 8 cents. Revenue, meanwhile, dipped 7.7% to $1.85 billion, as sales in its key heart rhythm business fell 15%. Analysts, on average, were calling for healthier sales of $1.91 billion. Looking ahead, however, BSX projected adjusted full-year earnings of 60 cents to 70 cents per share, on sales of $7.3 billion to $7.7 billion. For comparison, analysts are calling for a slimmer per-share profit of 46 cents on $7.63 billion in revenue.

As alluded to earlier, a handful of last-minute bettors rolled the bullish dice on BSX yesterday. By the close, the stock had seen roughly 8,200 calls cross the tape, more than doubling its average daily volume of fewer than 4,000 calls. On the flip side, just 931 BSX puts changed hands.

Digging deeper, we find that most of the action centered on the at-the-money February 6 call, which saw close to 7,500 contracts traded -- mostly at the ask price, suggesting they were bought. Plus, call open interest at the front-month strike swelled by more than 5,000 contracts overnight, hinting at newly bought bullish bets. By purchasing the calls to open, the buyers were expecting BSX to muscle north of the $6 level within the next few weeks.

Ahead of the bell, however, the shares of BSX are pointed 6.3% lower.


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