Community Health Services has been climbing on strong earnings,
and one investor is buying protection as the hospital stock
challenges long-term resistance.
optionMONSTER's Depth Charge tracking program detected the purchase
of 2,500 March 41 puts for $0.55. An equal number of March 38 puts
was sold at the same time for $0.05, but volume was below open
That suggests an existing position in the March 38s was closed and
rolled to the higher strike. As a result, the investor paid $0.50
for an additional $3 of downside protection.
The trade may have also been a new vertical put spread, a bearish
strategy that would earn a maximum profit of 500 percent if CYH
closes at or below $38 on expiration.
The shares fell 1.78 percent to $41.35 yesterday but have gained 18
percent since the end of January. The company's last earnings
report on Feb. 24 beat the consensus estimate, and guidance was at
the high end of forecasts.
CYH is pushing against the same $42 level that has been resistance
for the last four years. It is also trying to buy rival Tenet
Healthcare, which could potentially result in a higher bid. Both of
those factors could make investors nervous about a drop.
Overall option volume in the name was 7 times greater than average
in the session, with puts outnumbering calls by 52 to 1.
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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