Big Money Volatility Trader Targets Bristol-Myers Squibb Stock

BMY is set to close above its 100-day for the first time in months

by Karee Venema

Published on Mar 1, 2019 at 2:05 PM

It's been a volatile stretch for Bristol-Myers Squibb Co (NYSE:BMY), per the stock's 60-day historical volatility of 40.5%, which registers in the 90th annual percentile. Today, one options trader appears to be initiating a long straddle, betting on this wild price action to continue in the near term.

Most recently, roughly 150,000 calls and 98,000 puts had changed hands on BMY stock, five times what's usually seen at this point in the session. The March 57.50 call and put are most active, and it's possible one speculator initiated a long straddle for an initial cash outlay of $39.8 million (70,000 contracts * $5.69 premium paid per spread * 100 shares per contract).

This also represents the maximum loss on the trade, should BMY settle near the strike at front-month options expiration at the close on Friday, March 15. Profit, on the other hand, will begin to accumulate should the stock topple the upper breakeven rail of $63.19 (strike plus net debit), or breaches the lower breakeven rail of $51.81 (strike less net debit).

More broadly speaking, speculative players have bought to open puts relative to calls at a quicker-than-usual clip in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Bristol-Myers Squibb's 10-day put/call volume ratio of 0.65 ranks in the 89th annual percentile.

On the charts, Today, the stock has been gaining ground since its Jan. 3 five-year low of $44.30, up 18.75%. BMY shares popped 1.4% yesterday on news major shareholders were skeptical of the drugmaker's proposed takeover of Celgene. And thanks to today's 1.8% gain that has Bristol-Myers Squibb trading at $52.58, the security is on pace to close north of its 100-day moving average for the first time since Oct. 17.

bmy stock daily chart march 1

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