Waters Corp. (WAT) investor buys upside days before earnings


Shutterstock photo

With just days to go before Waters Corp.'s (NYSE: WAT ) scheduled earnings release, an investor appears to have taken a bullish stance on the analytical tools maker. The August 70 calls were active during trading on Monday due to buying action.

As of 3:10 p.m. EDT, WAT shares were trading up 92 cents, or more than 1%, to $65.51. WAT has not announced any notable recent news, but the company is due to announce earnings figures on July 28 before the market opens. Analysts estimate earnings of 90 cents per share. The stock is trading roughly 10% lower than its 52-week high of $73.78, and it looks like at least one investor expects the shares to experience further upside and move toward its highs during the near term.

During afternoon trading, more than 10,500 August 70-strike calls crossed the tape versus current open interest of 523 contracts. These near-dated calls traded in a few large blocks for 70 cents per contract. This price was the ask when the volume hit the tape, suggesting investors bought these calls on a bet that WAT shares will be trading higher than $70.70 at August options expiration in 25 days.

If WAT shares rally at least 8% during the next month and are trading higher than the breakeven price, the call buyers could theoretically make unlimited profits on this long call trade. On the other hand, if the stock is still trading lower than the strike price, the investor loses the entire premium paid on this trade.

The buying action in the August 70 line has pushed up implied volatility of these options on the day to 30%. The stock's historical volatility is also roughly 30%. With WAT shares trading up 92 cents, the price of the August 70 calls should be roughly 20 cents in the green. The calls, however, are trading up 25 cents thanks to the buying action on the day.

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

This article appears in: Investing , Options

More from Jud Pyle


Jud Pyle

Jud Pyle

Find a Credit Card

Select a credit card product by:
Select an offer:
Data Provided by BankRate.com