E-commerce giant Amazon.com, Inc. (NASDAQ:AMZN) is reportedly scrapping plans to sell and distribute pharmaceutical products to hospitals. Against this backdrop, several healthcare suppliers are moving higher — and attracting notable options activity. Among them, McKesson Corporation (NYSE:MCK) and Cardinal Health Inc (NYSE:CAH) stocks are getting a lift, with MCK and CAH options flying off the shelves.
MCK Options Traders Bet on a Bounce
MCK stock was last seen 4.8% higher at $149.70, attempting to topple its 40-day moving average for the first time since the February stock market correction. The shares of McKesson have surrendered roughly 16% since their late-January annual high of $178.86 — with help from surging fears about Amazon competition — though the $135-$140 area has acted as support since late 2016.
MCK calls are crossing the tape at five times the average intraday pace, with nearly 3,000 traded thus far. It looks like some traders may be buying to open the weekly 5/25 165-strike call, expecting the healthcare stock to rally north of $165 by the close on Friday, May 25, when the options expire.
However, it’s worth noting that short interest represents four days’ worth of pent-up buying demand, at McKesson stock’s average pace of trading. As such, the out-of-the-money call buyers could very well be short sellers seeking an options hedge.
CAH Traders May Be Speculating on a Bottom
Cardinal Health shares have popped 5.2% to trade at $63.56. The stock is now on pace to conquer its 20-day trendline for the first time in a month. From a longer-term perspective, CAH has been in a channel of lower highs since early 2015, but remains 4.5% higher year-to-date.
CAH put options are trading at eight times the average intraday clip, with roughly 6,100 contracts traded. It seems some traders may be employing May 60 puts to bet on a short-term, round-number floor for Cardinal Health stock. By writing the puts to open, the sellers can retain the entire premium received at initiation, as long as CAH shares remain north of $60 through May options expiration.
Prior to today, though, CAH put buying was par for the course. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity’s 10-day put/call volume ratio of 11.22 stood in the 94th percentile of its annual range. This indicates a healthier-than-usual appetite for Cardinal Health long puts over calls during the past two weeks.