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
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.