Community Health expected to rebound

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Community Health has been bloodied in its takeover battle with Tenet Healthcare, but now the bulls are looking for a rebound.

optionMONSTER's Heat Seeker tracking system detected the purchase of 4,000 September 32 calls for $3.30 and 2,500 September 38 calls for $1.16. A block of 3,000 September 25 puts was sold at the same time for $1.37. Volume was more than 6 times open interest in all three strikes.

The trade ended up costing $1.2 million and will simulate owning shares in the hospital stock, and it will profit rapidly from a move higher. The investor also faces the risk of losses beyond their initial outlay, but only if shares fall below $25.

CYH dell 1.91 percent to $30.75 in morning trading and has lost 21 percent of its value in the last month. Most of that drop occurred on April 11, when THC accused the company of overcharging Medicare and insurance providers. The allegations appeared to be an effort to stymie CYH's attempted hostile takeover of THC.

The larger company has denied the charges and said it will defend its name. Last night it reported earnings that were slightly better than analysts had expected, though revenue missed forecasts as admissions fell at hospitals open for at least a year.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: CYH , THC

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