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Option Bears Buy Back-Month Puts on Boston Scientific

The shares of BSX are battling familiar resistance on the charts

by 2/13/2012 9:18 AM
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Boston Scientific Corporation (BSX - 5.93) was popular among put players on Friday, with about 2,250 contracts traded -- compared to its average daily volume of fewer than 1,850 BSX puts. On the flip side, just 846 BSX calls changed hands during the course of the session.

Garnering the most attention was the equity's at-the-money March 6 put, which saw almost 1,600 contracts traded -- 99% of which crossed at the ask price, suggesting they were bought. Plus, put open interest at the back-month strike ballooned by more than 1,000 contracts over the weekend, confirming our suspicions of newly opened positions. By purchasing the puts to open, the buyers are betting on BSX to extend its recent retreat beneath the $6 level over the next several weeks.

From a wider sentiment scope, however, Friday's affinity for bearish bets stands in stark contrast to the growing trend. In fact, on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity sports a 10-day call/put volume ratio of 11.49. What's more, this ratio registers in the 82nd percentile of its annual range, implying that option buyers have initiated bullish bets over bearish at a faster-than-usual pace during the past couple of weeks.

Echoing that trend, the security's Schaeffer's put/call open interest ratio (SOIR) sits at 0.46, indicating that calls more than double puts among options expiring within three months. Plus, this ratio stands just one percentage point shy of a 52-week low, implying that near-term options traders have rarely been more call-heavy on BSX during the past year.

Ahead of the bell, the shares of BSX are set to follow the broader equities market into the black, with the stock pointed 2% higher. From a longer-term perspective, however, the equity could struggle in the $6-$6.50 neighborhood, which has rejected nearly all of BSX's weekly advances since early August.


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