Trader sees more upside in Edwards
Edwards Lifesciences has been trying to bounce, and one trader
apparently believes that it will succeed.
optionMONSTER's Heat Seeker monitoring program detected the purchase of 3,000 July 72.50 calls for $1.59 and the sale of an equal number of July 77.50 calls for $0.55. Volume was more than 5 times open interest at each strike, indicating that new positions were initiated.
Owning calls lock in the price where a stock can be bought, while selling them generates income and fixes a level where they must be sold. Combining the two strategies is known as a vertical spread , which lets traders control a rally between the two strikes.
In the case of today's transaction, the investor paid $1.04 and will collect $5 on a move to $77.50. That translates into profit of 381 percent from the shares climbing less than 11 percent. (See our Education section for more on the leverage of options.)
EW is trading at $70.19 this afternoon, down 0.41 percent on the session and 30 percent in the last year. The maker of heart valves gapped lower in October and again in April on weak earnings reports, but it has been trying to rebound in the last month after holding key support at $62. Today's spread is apparently looking for the shares to fill their last bearish gap from April.
Total option volume is already more than 7 times its daily average so far in the session, according to the Heat Seeker. Calls outnumber puts by 59 to 1.