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Boston Scientific Sees an Influx of Bullish Options Activity

BSX's May-dated calls attract bullish traders

by 2/29/2012 10:35 AM
Stocks quoted in this article:

Bullish options players converged on Boston Scientific Corporation (BSX - 6.28) on Tuesday, as roughly 12,000 calls changed hands, almost doubling the equity's average daily volume. Close to 3,600 of these calls were traded at the near-the-money May 7 strike -- the majority of them at the ask price, pointing to buyer-driven activity. Open interest at this strike rose by 2,532 contracts overnight, so it's safe to say that a large portion of the volume was made up of new positions. This option now holds peak call open interest of 13,994 contracts. By purchasing these calls to open, investors are counting on the stock to rise above $7 by the time May-dated options expire.

This spike in call volume seems to be part of BSX's ongoing bullish trend. The medical equipment manufacturer sports a Schaeffer's put/call open interest ratio (SOIR) of 0.66, confirming that calls comfortably outnumber puts among options slated to expire within three months. This ratio ranks in the 38th percentile of its annual range, indicating that short-term options players have been more call-heavy toward the stock just 38% of the time during the last 12 months.

Further reflecting this optimistic skew toward BSX is its 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio, which sits at 5.54. In other words, traders have bought to open more than five calls for every put over the past couple of weeks.

On the technical front, BSX has gained around 18% so far this year, and has outpaced the broader S&P 500 Index (SPX) by almost 9% during the past 40 sessions. A look at the charts shows that the stock is on pace to close a fourth consecutive session atop its 200-day moving average, which had been largely out of reach since early August.

At last check, however, the equity is down about 1.3% to hover at $6.28.


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