Markets

Why one bull is taking aim at Stryker

At least one bull is looking for Stryker to leg higher.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 2,700 January 48 calls for $1.20 to $1.60, compared with previous open interest of just 723 contracts.

These long calls lock in the entry price investors must pay to buy shares in the company, which makes replacement hips and knees. That means they can so can double or triple from even a modest appreciation in the stock price. But with that leverage comes risk, because the options will become worthless if the stock is below $48 on expiration. (See our Education section)

SYK rose 1.76 percent to $48.60 yesterday and has been trying to base out around $46 after dropping along with the rest of the market over the summer. Its last earnings report on Oct. 19 beat estimates and management raised guidance, but the shares have been struggling to break above their 100-day moving average.

Overall option volume was 5 times greater than average yesterday, with calls outnumbering puts by 6 to 1.

(A version of this post appeared on InsideOptions Pro yesterday.)

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

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


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

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