Dan Nathan Sees Unusual Options Activity In Baker Hughes

Dan Nathan spoke on CNBC's Options Action about unusually high bullish options activity in Baker Hughes Incorporated BHI. The options trading volume was three times higher than the average daily options trading volume and there was one bullish trade that caught Nathan's attention.

When the stock was trading at $42.50, a trader rolled out a bullish position by selling to close 1,000 contracts of the May 42 calls for $4.06 and buying to open 1,000 contracts of the May 45 calls for $2.86. The trade breaks even at $47.86 or approximately 12 percent higher from the closing price on Wednesday.

Baker Hughes traded sharply higher on Wednesday because there is a $3.5 billion breakup fee if the deal with Halliburton Company HAL doesn't go through. That is close to 20 percent of the stock market capitalization. Price traded higher on the news that the U.S. Department of Justice filed a lawsuit to block the merger.

Nathan added that options premiums are very high at the moment and he recommended to investors who want to take a long position in Baker Hughes to sell call options against a long stock position.