Call Activity in Bristol-Myers

Its been a rough 24 hours for the Bristol-Myers Squibb Company BMY. Late Wednesday the company stated that it is discontinuing a trial of its Hepatitis C drug because of a “serious safety issue.” Earlier today an assistant director for capital markets was charged with insider trading in companies before they were acquired. Shares are currently trading down nearly 9 percent and option activity suggests that investors are using this drop in price to open new bullish call positions. The September 33 calls and the August 34 calls have both seen opening activity with a majority of the trading taking place on the offers. Total contract volume is now 6 times the company's daily average with 34k calls trading versus 20k puts. A look at the graph below could explain why some investors are using today's slide as an entry point. The $32.00 price level has acted as support for the stock numerous times throughout 2012 and, instead of putting the capital out to buy shares, are buying releatively short termed bullish call options priced under $1.00.