Bullishness in Covidien (COV) ahead of earnings

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Covidien plc (NYSE: COV ) call volume spiked during morning trading thanks to an investor who appears to have taken a bullish stance on the medical instruments company. The August 37.5 calls were active during morning trading, and the majority of the options action seems bullish.

Between 9:49 a.m. EST and 10:39 a.m. EST, more than 3,500 in-the-money ( ITM ) August 37.5 calls changed hands for an average price of roughly $2.80 per contract. This price was closer to the ask when the volume hit the tape. Current open interest of these ITM calls is 19 contracts, indicating the options action was initiated to open. Investors who bought these calls will make money if COV shares are trading higher than $40.30 at expiration on Aug. 20.

The maximum profit on this long call trade is theoretically unlimited if the stock continues to the upside during the next few weeks. If COV shares are trading below the strike price at expiration, the investor loses the premium paid.

COV shares dropped 31 cents to $39.67 during morning trading on Friday. The company is due to announce earnings figures on July 29 before the market opens. Analysts estimate earnings of 80 cents per contract.



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.



This article appears in: Investing , Options

Referenced Stocks: COV , ITM

Karla Yeh

Karla Yeh

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