Boston Scientific Option Bulls Get a Boost From Buyout Reports

Boston Scientific stock rallied after the company's earnings release in April

Jun 11, 2018 at 2:45 PM
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Medical device stock Boston Scientific Corporation (NYSE:BSX) is trading up 9.5% at $34.99 after earlier being halted and then topping out at a 13-year high of $37.30, thanks to a Wall Street Journal report that sector peer Stryker (SYK) has approached the company with a takeover offer. This news is likely benefiting recent BSX options traders, who had been betting very bullishly before today.

By the numbers, more than 8,500 calls were bought to open during the past 10 days, compared to just 550 puts. The resultant 10-day call/put volume ratio of 15.54 is only 8 percentage points from an annual peak, confirming the peculiarity of this recent action. The back-month July 32 and August 31 strikes saw the largest increases in call open interest during this time by far, and anyone who bought to open the contracts are now sitting on what are likely substantial paper profits. 

Not surprisingly, calls are active again today, accounting for all 10 of the most popular options. The June 35 call is sitting near the top of the list, and data suggests traders are buying to open positions. Of course, anyone buying Boston Scientific options would be exposing themselves to elevated premiums, since the 30-day at-the-money implied volatility is at a 52-week high of 45.2%.

BSX shares had been outperforming all year, adding 29% year-to-date even before today and outperforming the S&P 500 Index (SPX) by 13.5% in the past three months. Helping the stock along the way was the company's late-April earnings release, when it raised its full-year outlook.

 

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