Bausch Health Guidance Brings Option Bulls

Speculators are scooping up weekly call options on BHC stock

Jan 7, 2019 at 10:54 AM
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Bausch Health Companies Inc (NYSE:BHC) is among the healthcare stocks making noise today. At the closely watched J.P. Morgan Healthcare Conference, Bausch said it expects an increase in year-over-year revenue in 2019, sending BHC stock 6.4% higher to trade at $22.61. What's more, BHC call options are flying off the shelves this morning, as traders speculate on more short-term upside for the shares.

In mid-December, BHC stock broke south of support at its 200-day moving average, and later that month bottomed at an eight-month low of $17.20. Since then, however, the equity has risen close to 32%, and is set to retake that trendline today.

BHC stock chart jan 7

Already today, Bausch has seen roughly 14,000 calls cross the tape -- three times the average intraday pace. That's compared to fewer than 4,000 put options. Among the most active are the weekly 1/11 24- and 25-strike calls, which it appears are being bought to open. By purchasing the calls to open, the buyers expect BHC stock to surmount the strikes by the close on Friday, Jan. 11, when the options expire.

Today's appetite for calls merely echoes the growing trend, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than three Bausch Health calls for every put in the past two weeks. Recent buyers will be happy to note that BHC has a Schaeffer's Volatility Scorecard (SVS) of 88 out of a possible 100, meaning the shares have exceeded options traders' volatility expectations in the past year.


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