One investor wants to turn time into money with Baxter.
optionMONSTER's tracking systems detected the sale of 3,000 June
52.50 puts for $0.98 and the purchase of an equal number of
November 52.50 puts for $3.20. Volume was more than twice open
interest at both strikes.
Known as a
, the trade cost $2.22. Given the different expiration months, the
June puts sold short will lose value more quickly than the November
contracts and cause the value of the position to increase.
The trade will perform best if BAX stays in its current range for
the next five weeks. If the stock closes below $52.50 on June 15,
the investor will lose the $2.22 initial outlay. Unlike most other
market-neutral strategies, calendar spreads are opened at a debit
rather than a credit. (See our
BAX is down 0.21 percent to $53.33 today. The stock gapped lower on
April 16 after the Food and Drug Administration demanded more data
on the company's HyQ blood product and has been staggering since.
It reported strong quarterly results three days later.
Given the sharp drop and the mixed news flow, some traders may now
expect the shares to trade in a range, which would explain the
Overall option volume is twice the average amount so far today.
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.