Baxter draws unusual three-way spread
Chris McKhann | email@example.com
BAX is up 1.74 percent this morning at $52.48. It bounced off long-term support and the 2012 lows at $49 in the middle of the month. Shares traded above $60 into early April.
Almost 25,000 contracts have traded, compared to a daily average of 2,700. That volume is almost entirely in an odd three-way spread, optionMONSTER's systems show.
A trader bought 6,000 August 55 calls for $0.49 while selling 3,000 July 52.50 calls for $1.01 and $1.06. He or she also sold 3,000 February 60 calls for $0.64 and $0.70. The volume in July was less than open interest and could be a closing position.
If that is the case, then the trader is selling those calls and rolling the position out in what is known as a "backspread." That would be bullish but could also profit marginally if shares move lower. The worst-case scenario is if BAX grinds higher to around the $55 strike price. (See our Education section)