DaVita drew a large hedging trade on Friday as the dialysis
stock traded near an all-time high.
optionMONSTER's Depth Charge tracking system detected the purchase
of 2,850 October 85 puts for $5.59, plus the sale of 4,275 October
75 puts for $1.72 and 1,000 October 95 calls for $3.10.
The transaction resulted in a net cost of about $548,000 and was
almost certainly the work of an investor who already owned shares.
Selling the downside puts and upside calls reduces the cost of the
October 85 puts to just $1.92, which will protect against DVA
falling over the next six months.
If DVA rallies to $95 or higher, the investor will be forced to
sell 100,000 shares because of the upside calls. And if it drops
below $75, more stock will have to bought at that price.
The trader may be willing to take that risk if he or she likes the
name over the long run. That's also near a peak from late last year
where some chart watchers may expect support to form.
DVA rose 0.1 percent to $87.04 on Friday and is up 25 percent so
far this year. Its last earnings report on Feb. 10 was slightly
ahead of expectations, and the next release is scheduled for May 3
before the bell.
The stock rallied more than 1,000 percent between 2000 and 2006,
consolidated for about four years before breaking free in October.
The protective trade pushed total option volume in DVA to 17 times
greater than average in Friday's session.
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