Tenet Healthcare is basing out after a big decline, and one
trader apparently thinks that the bottom is in.
optionMONSTER's tracking programs detected the sale of 4,322
December 4 puts for $0.10 against open interest of 825 contracts.
The trades appeared after the hospital stock held support above $4,
marking its third higher low since early September. The put seller
will get to keep their credit as long as THC remains above $4
Tenet fell 1.66 percent to $4.14 yesterday and has been grinding
sideways since July. It had traded over $6 in late 2009 and early
2010 but fell sharply in May and June.
Earlier in the session, about 2,000 January 4 calls were sold for
$0.35. Some of the sales occurred when the stock rallied back from
its low, so they may have been tied to share purchases.
For instance, investors could have paid $4.09 for the stock and
sold the calls, resulting in a cost basis of $3.74. As long as THC
remains above $4 by expiration, they would make about 7 percent
profit from such a trade.
The sales of both puts and calls reflect a belief that the stock
has only limited potential to move. Its implied volatility, a
measure of option pricing, has remained trapped at about 46 percent
since October while real volatility has plunged toward 31 percent.
This suggests that its options are overpriced, which explains
Overall option volume in THC was 14 times greater than average in
(Chart courtesy of tradeMONSTER)