Numerous spreads trade on Medco Health Solutions (MHS) Thursday. The largest is an April 47.5 – 55 (2X1) put ratio spread for 50 cents, 5000X, to open. The same spread traded again at 50 cents, 2100X, and at 50 cents, 1000X. MHS came under pressure and lost 8.1 percent Monday on concerns about its deal with Express Scripts. Today’s flow isn’t entirely bearish, however, as a Jun 70 – 80 call spread was apparently bought on the stock for $2.35, 2400X. A Jun 60 – 70 (1X2) call ratio spread was apparently bought for $2.70. Another spread involved 1,000 April 60 – Mar 65 calls for $4.00. Shares are off 35 cents to $60.47 and levels of implied volatility moved up 2 percent to 48. The numerous spreads in MHS seem to reflect mixed expectations about the merger. The New York Post ran a piece Tuesday suggesting a 50 percent chance the deal will get FTC approval.
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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.