Unusual Options Activity: Bristol Myers-Squibb (BMY)

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  • At least one trader is betting that pharma giant Bristol Myers-Squibb (BMY) will have a big rally in the first half of 2021. That’s based on the call buying in the June 2021 $72.50 calls. The strike price of the option is about 15 percent higher than where shares currently trade at $62.

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  • Over 2,500 contracts traded against a prior open interest of 263, a nearly 10-fold rise in volume. The buyer of the contracts paid about $1.09 on average.

    While BMY has been working on a Covid vaccine, it’s lost out to Moderna and Pfizer in the race so far. But as a giant in the space with a number of drugs under development and review, there’s always a good chance for a rally on positive news there. Add in how shares have been a relative underperformer, and it’s easy to see why shares could move higher in the next seven months.

    Action to take: There’s a reasonable value for investors who buy under $62.50, as the pharma giant trades at less than 9 times forward earnings and pays a 2.9 percent dividend yield.

    Given the option’s low price in the $1 range, the June calls are also a reasonable bet relative to the risk involved. Traders should look for some kind of news event as a cue for taking profits on the position. While the trade is inexpensive, it’s all time premium, but traders will still have into the spring before that becomes an issue.

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