Friday, March 25, 2011

Trade of the day: Bristol-Myers Squib Co.

Today's notable action comes fromBristol Myers Squibb Co. The company received approval for a new drug that has garnered a lot of attention. This seemingly led to an accumulation of approximately 1mm net deltas across calls and puts today in BMY. The stock was active on almost 4 times its normal volume.

Courtesy: LivevolPro

Traders pushed the stock higher today - so high in fact, that it touched some major long term resistance, before closing up 86c or about 3.3%. A break above that $28 level could constitute a major breakout for the stock, which you can see below on the weekly chart from Interestingly enough, the push up comes with some bearish divergence on the MACD.

A look at a second chart, below, shows us a more short term perspective that also integrates a look at IV30, which spiked with a rapid drop in the share price. I searched through the prior days time and sales, but didn't see anything that was overtly suspicious in the way of order flow, although a large call spread (4k contracts) did go off several days ago. Really could just be lucky timing though.

Courtesy: LivevolPro
 Taking a look at the skew, there isn't anything too out of the ordinary here, but a trader looking for a break to the upside that is unwilling to take much risk on the downside might look to pickup some cheap out of the money calls. The IV isn't juiced up enough for me to get very excited about selling premium to take augment any play on direction here. In fact, it might not be bad choice to just be outright long gamma.

Courtesy: LivevolPro
 At the risk of sounding like a broken record, this one will be another worth keeping an eye on as the bulls will certainly try to test that $28 resistance in the future. If they fail, it will be key to see how the stock handles $25 and perhaps it might try to fill its gap at around $23.

No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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