The bulls are running rampant in hospital stocks.
Just yesterday, we cited aggressive upside positioning in
Community Health Systems
. The paper continues today as a winning bet is rolled higher in
optionMONSTER's Heat Seeker monitoring system detected the purchase
of 2,500 November 45 calls for $1.20. The trade came just seconds
after a block of 2,000 November 41 calls were sold for $3.60
against previous open interest.
It looks like the investor came into the session long the 41s. He
or she then exited those contracts and rolled up to the 45s. They
collected a credit of $420,000 in the process and remain exposed to
continued upside in the name. In fact, they stand to profit even
more from a big rally because they increased the number of
lock in the price where the stock can be purchased, providing cheap
exposure to the upside. Investors often roll from one contract to
another to optimize returns and manage risk. See our
Section for more on how you can do more with less money using
options instead of common stock.
HCA is up 2.81 percent to $43.95 in afternoon trading. It spent
most of the year consolidating between $36 and $41 but has now
broken above that range. Some chart watchers may consider that
evidence of a breakout.
Total option volume is already more than double its full-session
average, according to the Heat Seeker. Calls outnumber puts by a
bullish 47-to-1 ratio.
Yesterday's investors are also sitting pretty because they bought
the November 44s for $1. Those same contracts are worth $1.65
today. The CYH December 43 calls cited for $1.85 traded up to $2.90
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.
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