An interesting bullish strategy in Baxter

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Baxter International is hovering near an all-time high, and one investor doesn't want to let it get away.

optionMONSTER's Heat Seeker managing system detected the purchase of about 2,700 May 77.50 calls for $0.98 and the sale of a matching number of May 65 puts for $1.27. That translates into a credit of $0.29.

The resulting position has an interesting performance profile. If the supplier of medical products retreats to $65 on expiration, the investor be assigned shares at that level. He or she also stands to make money on the calls if the stock explodes into record territory.

Should BAX do nothing, the entire position will expire worthless and the trader will keep the $0.29. Its dual purpose is to avoid missing a rally while programming a buy order at a lower price.

The investor can now sit back and let the options do the rest of the work. (See our Education section for more on how options can save you time.)

BAX rose 0.87 percent to $69.89 on Friday and is up 18 percent in the last six months. The stock is now parked at the same level where it peaked in September 2008 before the subprime market crash.

The Heat Seeker also detected a similar bullish trade in late January, which cost $0.49 and more than tripled in value by earlier last week. (See related story )



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: BAX

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