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Behind the big bearish bet on Bristol-Myers

Using put options to protect your drug holdings. That's not the elevator pitch for a 'Wolf of Wall Street' sequel—it's the prudent strategy one options trader employed in huge size to hedge against potential downside in Bristol-Myers.

Shares of Bristol-Myers Squibb soared on Thursday, as investors cheered news that the company reported positive trial data for its lung cancer drug nivolumab. Of patients with advanced lung cancer who received the drug, only 59 percent were dead a year later. This may sound incredibly grim, but it is actually positive news given that the survival rate for patients in the study had ranged only from 5.5 percent to 18 percent, according to the company.

Read MoreCramer: Could new drug ultimately arrest cancer?

As a result of the announcement, shares of the drug company rose 9 percent.

However, the biggest options trade was actually a bearish one. One firm bought 7,500 November 55-puts for 49 cents each—a trade that will make money only if the stock is below $54.51 at November expiration, or 7.5 percent below Thursday's closing price.

A researcher in a Bristol-Myers Squibb laboratory.
Emile Wamsteker | Bloomberg | Getty Images
A researcher in a Bristol-Myers Squibb laboratory.

Yet rather than an outright bearish bet on the stock, this trade might well be a tactical hedge.

Read MoreThis drug became kosher (but it doesn't matter)

"They really need some big hits in these drugs—I have no idea" whether that will happen, Dan Nathan of RiskReversal.com said Thursday on CNBC's "Fast Money." "So this trader's probably thinking, yes, I have this trade on, but I'm going to buy some protection so I have my downside covered."

Still, even setting aside the recent clinical trial results, Nathan notes that there are many good reasons to be long Bristol-Myers—including a "beautiful technical setup" as the stock broke out to 13-year high on Thursday, and a sizable dividend yield.

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    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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