Abbott Laboratories, St. Jude Medical Deal Provokes Different Responses

Abbott Laboratories (ABT) announced plans to purchase St. Jude Medical, Inc. (STJ) for $25 billion in cash and stock

Apr 28, 2016 at 10:11 AM
facebook X logo linkedin

Abbott Laboratories (NYSE:ABT) has reached a deal to buy fellow healthcare firm St. Jude Medical, Inc. (NYSE:STJ) for $25 billion, or roughly $85 per share, in cash and stock. The buyout agreement has sent the drug stocks in different directions, likely provoking different responses from options traders betting on ABT and STJ.

Call buying has been extremely popular among Abbott options traders across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). The stock's 10-day call/put volume ratio of 3.98 indicates four calls have been bought to open for each put in recent weeks. What's more, that ratio ranks in the bullishly skewed 80th annual percentile.

Suffice it to say, option bulls may not be too pleased to see ABT slumping 6.5% this morning at $40.98. This represents quite the reversal, as the stock had been trending higher for months following a late-January two-year low of $36. Should the upbeat traders decide to turn tail, it could spark additional selling pressure on Abbott Laboratories.

On the other hand, STJ has ripped 27.4% higher at $78.93. In fact, the stock is approaching its record high of $80.84 from July -- which should delight option bulls. Specifically, St. Jude Medical, Inc.'s 10-day ISE/CBOE/PHLX call/put volume ratio registers at a top-heavy 34.56 -- and outstrips 87% of all other readings recorded in the last year. What's more, the stock's Schaeffer's put/call open interest ratio (SOIR) sits at an annual low of 0.17, with calls more than quintupling puts among options expiring in the next three months.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.


Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!