A Bearish Bet Against Abbott Labs
Abbott Laboratories is near an all-time high, but one option trader apparently believes that it’s coming back to earth.
Yesterday’s option trade in the pharmaceutical name was dominated by a large print in the November 62.50 puts, with 5,266 purchased for the ask price of $1.50, according to OptionMonster’s tracking systems. That volume was twice the previous open interest and wasn’t tied to any trading in the underlying shares.
The investor now has the right to sell shares of the drug maker for $62.50, no matter how low it falls. The company will report second-quarter results next Wednesday, July 18, so the put buyer might be looking for a longer-term decline based on those results.
Owning puts is similar to selling a stock short , profiting from downside in the shares. But if the stock holds its ground or climbs, these options will expire worthless.
Abbott Laboratories shares ended the session up 0.03 percent to $65.18. The previous day it touched $66.30 before retreating.
Overall puts in the name outnumbered calls by almost 2 to 1, reflecting yesterday's bearish sentiment. Total volume was twice the daily average.
—By CNBC Contributor Chris McKhann
Additional News: As Pharma Ticks Higher, Managing Directors Share Picks
Additional Views: Cramer’s Top Dividend Stocks: Abbott Laboratories
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Chris McKhann is an analyst and writer for OptionMonster. McKhann has no positions in ABT.
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