Bristol-Myers Squibb Co (BMY) Options Volume Heats Up After Earnings

Bristol-Myers Squibb Co (BMY) is popping on well-received earnings

Oct 27, 2016 at 10:47 AM
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Drugmaker Bristol-Myers Squibb Co (NYSE:BMY) reported third-quarter earnings and revenue above analyst expectations this morning, while also raising its full-year guidance. On top of that, the company authorized a stock buyback program worth $3 billion. Traders seem pleased with the results, as the stock is up 4.8% to $51.64, and BMY options are flying off the shelves.

At last check, BMY calls and puts are both changing hands at about three times the expected intraday rate, putting total options volume in the 99th percentile of its annual intraday range. Leading the action so far are the weekly 10/28 51- and 52-strike calls, with some buy-to-open action spotted at each. Buyers of the calls are betting on BMY to rally through the close tomorrow night, when the weekly options expire.

A preference for long calls is nothing new among BMY options traders. Over the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have purchased nearly four of the stock's calls for every put. The resulting call/put volume ratio of 3.88 ranks near the top quartile of all readings from the past 12 months.

Not everyone is so optimistic, however. Two-thirds of the analysts tracking BMY maintain a "hold" or "strong sell" rating on the shares. And that skepticism is understandable, given the stock's technical performance.

Specifically, BMY has shed 25% of its value year-to-date -- tapping a two-year low of $49.03 just two days ago -- after suffering a series of drug-induced bear gaps in the past three months. In fact, shares of Bristol-Myers Squibb Co (NYSE:BMY) haven't closed north of their 30-day moving average since Aug. 4, and that trendline has so far contained the stock's intraday gains.

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