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Why trader is selling puts in Baxter

Mike Yamamoto (mike.yamamoto@optionmonster.com)

As Baxter remains near its 52-week highs, one trader is betting on a floor beneath shares of the medical-products company.

optionMONSTER's tracking systems detected the sale of 3,465 May 55 puts at the same second for $1.07. This is a new position, as volume was more than 10 times the strike's open interest at the beginning of the session.

BAX is up 0.2 percent to $65.72 this morning after pulling back from resistance near the $68 level in recent weeks. The stock hit a 52-week low of $48.98 in mid-June but then rose for several months until reaching its high for the year at $68.91 on the day before Thanksgiving.

The put seller is looking for BAX to close above the $55 strike price at expiration in mid-May. If the shares are above that level, the trader will face the obligation to buy the stock at an effective price of $53.93 when the credit from the put sale is included. (See our Education section)

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