EW – Edwards Lifesciences Corp – The provider of products and technologies created to treat advanced cardiovascular disease popped up on our ‘hot by options volume’ market scanner after one options player initiated a sizeable bearish transaction in the November contract. Shares of the medical supplies company are currently down 0.80% to arrive at $59.29 as of 1:55 pm ET. The investor established a ratio put spread, buying 5,000 puts at the November $57.5 strike at a premium of $2.95 each, and selling 10,000 puts at the lower November $47.5 strike for premium of $0.75 per contract. The net cost of the pessimistic play amounts to $1.45 each. Thus, the responsible party is poised to profit should Edwards Life Sciences’ shares decline 5.5% from the current price of $59.29 to slip beneath the effective breakeven price of $56.05 by expiration day in November. Maximum potential profits of $8.55 per contract pad the put-spreader’s wallet as long as the price of the underlying stock plummets 19.9% to settle at $47.50 at expiration. The sharp increase in demand for put options on EW lifted the stock’s overall reading of options implied volatility 7% to 40.64% by 2:00 pm ET.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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