Unusual Options Activity: Edwards Lifesciences (EW)

Medical device manufacturer Edwards Lifesciences (EW) is down 14 percent over the past year, with shares taking a beating in recent sessions. One trader sees a potential rebound ahead in the coming weeks.

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  • That’s based on the October $82.50 calls. With 28 days until expiration, 5,738 contracts traded compared to a prior open interest of 209, for a 27-fold rise in volume on the trade. The buyer of the calls paid $0.55 to make the bullish bet.

    Edwards shares recently traded for about $72, so the stock would need to rise just over $10 per share, or over 28 percent for the option to move in-the-money.

    Such a move is possible with medical device companies, which tend to have strong rallies and drops in the course of a year.

    Operationally, the company’s performance has been mixed. Earnings have dropped by a quarter in the past year, but revenues are up by over 11 percent.

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  • Action to take: Shares look oversold following their recent drop. While Edwards doesn’t pay a dividend, a snapback rally in shares in the coming months could lead to mid-double-digit returns for shareholders.

    For traders, the October calls are aggressive, as a strong rally may not occur in the next few weeks. But even a rally in shares could lead to high-double-digit returns for investors in the next few weeks.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.


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