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Options Flag Watson As Takeover Target

Options action on Watson Phamaceuticals indicates that traders think it might be a takeover target, according to one options experts.

"This is an interesting stock because it has landed in the cross-hairs of very eager call buyers previously on speculation that it might make an attractive takeover target," said Rebecca Darts of Interactive Brokers said Thursday morning on CNBC's "Squawk Box." "Most recently, we saw this back on July 21, in the wake of Teva's takeover of Barr Pharmaceuticals , but yesterday, with shares in Watson trading flat, we saw call volume hit a 52-week high, sending overall volume to about 14 times the normal volume."

Calls, which the buyer an option to buy a stock at a particular strike price in the future, are very active, she indicated.

"During the past month, call open interest -- which is the number of open call position contracts to buy Watson stock -- has increased 77 percent, so that tells us there's a rising litany of bulls on Watson Pharmaceuticals, and this is going to be an interesting stock to watch, even though there's not a specific rumor right now."

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