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Midday option trade alert: Call buying in Hologic
Hologic Inc. (NASDAQ: HOLX) reached a fresh 52-week high this morning following takeover chatter that Phillips Electronics N.V. (NYSE: PHG), a Netherlands-based healthcare electronic equipment provider, could acquire the healthcare equipment manufacturer, and heavy call action suggests investors are taking a bullish short-term stance.
By 1:30 p.m. EST, more than 10,000 out-of-the-money April 20 calls had crossed the tape versus current open interest of 573 contracts, indicating investors traded these options to open. During this morning’s session, the calls traded at the as price of 25 cents per contract. Investors who bought these calls will make money if HOLX shares close higher than $20.25 at April options expiration. These calls have already appreciated by $1.30 so far on the day, putting bullish investors who bought the options in profitable territory.
More bullish activity crossed the tape in the March 20-strike calls, which have changed hands nearly 4,000 times so far today. It looks like investor paid roughly 65 cents per contract, which means this long call position will turn profits if HOLX shares close higher than $20.65 at March options expiration in eight days. These calls have gained 65 cents so far today.
The April 20 calls have an implied volatility of 64%, while the March 20 calls have an implied volatility of 82% compared to a 30-day historical volatility of 30% (the buying action today has pushed up implied volatility levels).
HOLX options investors who bought these calls do not necessarily need to hang on to them until they expire; if the call continue to climb along with the stock, investors could choose to sell them back to book profits. In both trades, it looks like investors are looking for an inexpensive way to get in on the potential HOLX rally surrounding takeover chatter.
Though PHG has denied takeover rumors, according to published reports, HOLX shares have gained more than 7%, or roughly $1.26, to $18.81 after climbing to $18.90 during morning trading. A significant rally such as this sometimes signals selling action, but options activity suggests investors are calling for even further upside.
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