Baxter International Inc. (NYSE: BAX )
are outperforming the broader market losses without any notables
news on the medical instruments company. Options action on the tape
suggests an investor is not done with a long call play and chose to
roll a front-month position out to November.
Around 11:10 a.m. EDT, roughly 20,000 August 45 calls changed
hands for $1.14 per contract. Simultaneously, the same number of
November 47.5 calls crossed the tape for $1.49 per contract.
Current open interest of the front-month options is more than
30,000 contracts while the November 47.5 calls are home to current
open interest of just 2,100 contracts. This options action
indicates an investor most likely sold the close the August 45
calls and rolled up and out to open the November 47.5 calls on a
bet that BAX shares could experience more upside for a longer
period of time. The next debit on this trade was 35 cents per
The investor is betting that BAX shares will be trading higher
than $48.99 at November options expiration (Nov. 19). If the stock
is trading roughly 7% higher than its current level, the investor
could theoretically make unlimited gains to the upside. The open
long call position is even more bullish tha the original trade, as
it is at a higher strike, and it's interesting that the investor
was willing to commit even more capital to call for a near-term
If the stock is still trading below the open long call strike
price, the investor loses the premium paid to enter the trade
($1.49 per contract, in this case). BAX shares have not breached
the $47 mark since late-April, but at least one investor seems to
think volatility will increase and push the stock up during the
next couple of months.
ONN covered a moderately bearish short call trade in BAX that
crossed the tape yesterday. An investor sold the LEAPS January 2012
52.5 calls for $2.73 per contract. This trade bets on limited
upside, and will make money if the stock is trading below $55.23 at
January 2012 options expiration.
BAX shares gained 52 cents, or more than 1%, to $45.87 during
morning trading. The stock reached a 52-week high of $62 in
January. BAX announced earnings of 93 cents per share on July 22
and beat estimates by one cent.