Large Option Traders Betting Boston Scientific Has Run Out Of Steam

Boston Scientific Corporation BSX are up 8.5% since the company reported third-quarter earnings in late October.

On Wednesday morning, Boston Scientific had the attention of several large option traders, and the action was more bearish than bullish.

The Trades

Benzinga Pro subscribers received three option alerts related to unusually large trades of Boston Scientific options:

• At 10:10 a.m., a trader sold 1,656 Boston Scientific call options with a $33 strike price expiring on Jan. 17, 2020 at the bid price of 64.1 cents. The trade represented a more than $101,149 bearish bet.
• At 10:12 a.m., a trader bought 620 Boston Scientific call options with a $42.50 strike price expiring on Nov. 29 near the ask price at 40.9 cents. The two trade represented an $23,358 bullish bet.
• At 10:23 a.m., a trader sold 1,239 Boston Scientific call options with a $41.50 strike price expiring on Nov. 29 at the bid price of 94 cents. The trade represented a $116,466 bearish bet.

All together, the three trades represented a net bearish bet of nearly $200,000.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively small sizes of the Boston Scientific trades on Wednesday morning by institutional standards, they are unlikely to be hedges.

Boston Scientific Rally On Pause?

The option trades in Boston Scientific come after the medical device giant reported double-digit earnings and revenue growth in the third quarter. Results from the medical surgery and cardiovascular segments were particularly strong.

This week, Boston Scientific tried unsuccessfully to lobby the White House to modify pending changes that could cut Medicare reimbursements for procedures inserting its Superion Indirect Decompression System. The company argued unsuccessfully that cutting reimbursements for the system would lead doctors to continue to rely on opioids for treatment of chronic pain.

Looking ahead, an aging global population should help demand for Boston Scientific and other stocks in the health care sector. However, the medium-term outlook could be bumpy given health care will likely be a central topic of the 2020 U.S. election season.

Benzinga’s Take

The bad news for Boston Scientific bulls on Wednesday is that, while there were both bullish and bearish trades, the two biggest trades were bearish in nature, assuming they did not represent hedges.

The good news is that call sales aren’t necessarily as bearish as large put purchases and may simply represent traders taking profits after Boston Scientific’s post-earnings run.

The stock traded around $41.28 per share at time of publication.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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