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Traders bet big on this health-care stock

After leading the market for most of this year, health care is among one of the worst-performing S&P 500 sectors in the past month, down nearly 7 percent. But despite the recent declines, some savvy traders are sensing opportunity in the space in the form of one pharmaceutical name: Bristol-Myers Squibb.

"We saw three times the average daily call volume [Wednesday] in Bristol-Myers Squibb," options expert Mike Khouw said Wednesday on CNBC's "Fast Money." Shares of the company are down more than 10 percent in the past three months.

According to Khouw, much of that bullish activity was concentrated in one trade that bet the stock could rally more than eight percent by next month. Specifically, 12,000 contracts of the October 62.50-strike calls were bought for 70 cents each. Since buying a call allows one the right to purchase a stock at a set price for a given time, this trade is profitable if shares of Bristol-Myers Squibb rally above $63.50 by October expiration. The stock was trading around $58.50 on Thursday.

Read More Health care remains the best bet: Strategist

"We saw the implied volatility, which is the price of options, rise throughout the day [Wednesday]," the co-founder of Optimize Advisors added. For Khouw, that is confirmation that the general options sentiment in the stock is positive.

Wall Street analysts appear to share a similar outlook as Khouw, of the 21 that cover the stock, the average price target is $70.58 with an overweight rating, according to FactSet. That would put shares at an all-time high.

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  • Melissa Lee

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

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