HOLX – Hologic, Inc. – The manufacturer and supplier of medical imaging systems and diagnostic and surgical products was upgraded to ‘buy’ from ‘hold’ and tagged with a 12-month target share price of $20.00 at Needham & Co. today, sending its share price up 1.70% to $14.97 just ahead of 11:45 am (ET). One bullish investor opted to roll a long call stance forward to a higher strike price in order to position for continued share price appreciation through July expiration. The trader sold roughly 8,985 calls at the June $15 strike for a premium of $0.40 apiece in order to get long approximately the same number of calls at the higher July $17.5 strike for a premium of $0.60 each. The net cost of the calendar roll – in isolation – amounts to $0.20 apiece and positions the investor to make money should Hologic’s shares surge more than 18.2% over the current price of $14.97 to surpass the breakeven point at $17.70 by July expiration. It is unclear how much the investor originally paid to establish the long call stance at the June $15 strike. However, looking at call open interest at that strike, it appears the trader might have initially paid premium of $1.10 to $1.15 per contract to purchase the calls back on December 18, 2009, when shares of the underlying stock were trading at a volume-weighted average price of $13.46. If these circumstances are accurate, shares must rally much more significantly for the investor to recoup losses on the original call purchase.
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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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