Express Scripts Options (ESRX): Unusual Trading Activity

| May 9, 2012 | 0 Comments

ESRX OptionsOptions in the pharmaceutical company Express Scripts (ESRX) are already trading enormous volume this morning.

Our tracking system today just keeps flashing with call buyers.  Option traders are buying multiple strikes for the May expiration.

This indicates bullish trades being placed.  Most likely ahead of ESRX earnings announcement tomorrow before the open.

The largest volume is centered around the May $55 and the May $60 call contracts.  These two strikes have already traded over 8,000 contracts this morning alone.

And even though ESRX is trading down $1.00 to $54.25 a share this morning, option traders obviously don’t seem very concerned.

The fact is, Express Scripts was been down over the last few trading days, but has not broke below its support level of $53.00 a share.

Now, with a possible market bounce on the horizon, option traders are coming in by the busloads.

They’re paying $0.60 for the May $57.50 call options and $0.20 for the May $60 call options.

Make note that, although these are relatively speculative trades that are far out of the money, hopes are running high due to earnings tomorrow.

Express Scripts is the largest pharmacy benefit manager in the United States… through its mail-order pharmacy and network of retail pharmacies.  The company administers around 1.5 billion prescriptions a year.

Demographic trends and growth in overall drug spending are providing ESRX with a solid backdrop for growth.

In addition, Express Scripts makes a much higher margin than traditional drug companies because it focuses on generic drugs.

Best of all, it has huge growth potential as the US is in the midst of an unprecedented wave of patent expirations on blockbuster brand-name drugs.

So I believe that earnings tomorrow will come in better that expected and these option traders will be rewarded handsomely.

Let’s wait and see!

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Category: Unusual Options Trading Activity

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.