Call Players Swarm Abbott Laboratories (ABT) On Muddy Waters' St. Jude Slam

Abbott Laboratories (NYSE:ABT) has swung lower today, after Muddy Waters posted some scathing St. Jude Medical, Inc. (NYSE:STJ) tweets

by Karee Venema

Published on Oct 19, 2016 at 11:17 AM

After edging higher out of the gate in the wake of a solid third-quarter earnings report, Abbott Laboratories (NYSE:ABT) has since swung 2.1% lower to trade at $40.30, as the drugmaker battles seering accusations toward St. Jude Medical, Inc. (NYSE:STJ) -- which is in the process of being acquired by ABT -- from Muddy Waters. Specifically, the short seller has taken to Twitter today to post "shocking" videos showing how STJ's heart devices are vulnerable to hackers, and reiterated its short position on STJ stock. And while call volume has caught on fire in ABT's options pits, it looks like one trader is using calls to set a short-term ceiling on the stock.

At last check, roughly 13,000 ABT calls were on the tape -- five times the expected intraday amount of 2,349, and nearly five times the number of puts that have traded. Almost all of the action has centered at the stock's November 44 call, due to one block of 7,578 contracts that crossed about 45 minutes after the open. Per the International Securities Exchange (ISE), this block was sold to open, meaning the trader expects ABT to remain south of $44 through back-month options expiration at the close on Friday, Nov. 18.

Today's November 44 call trader is hardly alone. As it turns out, this strike is home to peak open interest across all of ABT's options series, with 39,582 contracts outstanding. This may explain why the equity's Schaeffer's put/call open interest ratio (SOIR) is tilted in a call-heavy direction -- at 0.50, and in the 8th percentile of its annual range. In fact, the next most populated near-term ABT strike is the October 41 call, where fewer than 10,000 contracts currently reside.

Widening the scope to account for all of ABT's options, speculative players have shown a preference for calls over puts. By the numbers, call open interest accounts for 219,086 contracts outstanding, while just 139,851 puts are presently open on ABT. Both metrics, meanwhile, are docked at a 52-week peak.

Looking outside of the options pits, short sellers have been quick to bet against Abbott Laboratories. Short interest jumped 11.6% in the two most recent reporting periods. While the 72.1 million shares sold short only account for around 5% of ABT's available float, its within striking distance of its mid-August peak of 72.74 shares -- the most in at least 14 years.

Technically, Abbott Laboratories (NYSE:ABT) has shed 12% since topping out at its most recent high of $45.79 in early August. More recently, ABT stock gapped lower just last week, after devastating reports of STJ's implanted heart devices surfaced.

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.

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!


  
 

Partnercenter


NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories


Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
J M Smucker Stock Jammed by Ugly Sales Outlook
J M Smucker's fourth-quarter profits and revenue were better than Wall Street expected
NIO Rises on Record-Breaking Deliveries
Nio stock hit a record high in vehicle deliveries for May
The Next Big Player in U.S. MJ Boom
Most pure-play marijuana stocks in the U.S. trade on the Over-the-Counter stock exchange.