Unusual Call Activity in Baxter

According to Options and Volatility, shares of Baxter International BAX saw unusually high options activity on Monday. Notably, the 7/10 July 38 Calls saw 10,779 contracts trade versus zero open interest. In addition to the increased volume, the implied volatility on the BAX 7/10 38 calls rose dramatically, moving from 19.31 on Thursday's close to 23.00 on the close Monday, an increase of nearly 20 percent. The BAX 7/17 38 calls, which traded only 599 contracts, increased less dramatically, moving from a 19.40 implied volatility to 21.52, a rise of only 11 percent. This sets up a calendar spread opportunity, buying next week's 38 strike calls and selling this week's 38 call, paying 0.20 for the spread. Options and Volatility noted this captures a 1.37 skew edge and positions slightly bullishly along with the large call buyer. In addition, earnings are expected out July 16th, which should benefit the spread as well.