Varian Medical Systems rallied into the close, but one bear apparently thinks that the X-ray equipment maker could be headed to the sickbed.
optionMONSTER's Depth Charge tracking system detected the purchase of 2,000 August 50 puts for $1.35 and the sale of a matching number of August 45 puts for $0.40, resulting in a debit of $0.95. The trade pushed overall option volume in the stock to 10 times greater than average.
VAR rose 2.21 percent to $53.54 yesterday and is up about about 10 percent in the last month. The stock has been rebounding off its 200-day moving average (purple line on chart) after dropping along with the rest of the market, which some traders may consider evidence it remains in a bullish uptrend.
The company reported better-than-expected revenue and earnings on April 28, followed by a bullish forecast for 2010. However, management attributed the gains to strong overseas demand and said its tax rate will go up.
Given worries about European sovereign debt and the strength of the global economy, some traders may expect a disappointment heading into the next earnings report on July 28. VAR is also scheduled to appear at the Piper Jaffray cancer summit on July 13-14.
Yesterday's option trade, known as a bearish put spread, will earn a maximum profit of some 425 percent if VAR closes at or below $45 on expiration.
Puts outnumbered calls in the session by 22 to 1, a reflection of the bearish sentiment.
(Chart courtesy of tradeMONSTER)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.