Catamaran has gotten hammered for the last year, but traders are
looking for a rebound in the provider of pharmacy benefits.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of 4,000 October 50 calls for $1.55 and the sale of an
equal number of October 60 calls for $0.15. There was barely any
open interest at either strike before the trade appeared, which
indicates that new positions were initiated.
Known as a
bullish call spread
, the trade cost $1.40 and will inflate to $10 if Catamaran's stock
closes at $60 or higher upon expiration in mid-October. That would
represent profit of 614 percent from the shares climbing about 40
percent. (See our
section for more on the leveraging potential of options.)
CTRX is down 2.24 percent to $42.78 in afternoon trading, its
lowest level since September 2012. The stock has been falling since
last summer amid concerns about the rise of private health-care
exchanges, cratering on Feb. 27 after issuing a weak profit
The advantage of today's call spread is that it lets the investor
position for a rebound cheaply, while limiting the amount of
capital at risk if it breaks support and heads lower. He or she is
spared the difficulty of buying protection or deciding where to
Total option volume in Catamaran is already 13 times its
full-session average so far today, with calls outnumbering puts by
11 to 1.
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