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Boston Scientific Bears Roll the Dice on Resistance

However, BSX's short-term options crowd is still more call-heavy than usual

by 6/19/2012 10:02 AM
Stocks quoted in this article:

Medical device maker Boston Scientific Corporation (BSX - 5.82) was targeted by put traders on Monday, with nearly 3,200 contracts exchanged -- more than twice its average daily put volume. For comparison, just about 1,100 BSX calls crossed the tape during the course of the session.

Jumping right in, we find that nearly all of the action centered on the at-the-money July 6 put, which saw close to 3,100 contracts traded -- all at the ask price, suggesting they were bought. Plus, put open interest at the newly front-month strike ballooned by close to 3,000 contracts overnight, confirming the initiation of new positions. By buying the July 6 puts to open, the speculators are expecting BSX to remain south of the $6 level through the next several weeks.

However, yesterday's appetite for bearish bets merely echoes the growing trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where BSX's 10-day put/call volume ratio of 1.00 ranks in the 85th annual percentile. In other words, options traders have bought to open BSX puts over calls at an accelerated clip during the past couple of weeks.

Nevertheless, the aforementioned put buyers might've been honing in on longer-term contracts, considering the stock's Schaeffer's put/call open interest ratio (SOIR) -- which measures options expiring within three months -- has descended to 0.42, its lowest point of the year. Or, simply put, near-term options traders haven't been more call-heavy toward BSX at any other time during the past 12 months.

On the charts, the shares of BSX have spent most of 2012 bouncing between support in the $5.60 region and resistance around $6.40. Reinforcing this technical stronghold is the stock's 100-week moving average, which has rejected BSX's rebound attempts during the past couple of years.

Weekly Chart of BSX since December 2010 With 100-Week Moving Average


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