Tenet Healthcare plunged yesterday after saying it might acquire
an Australian company, but the options activity was bullish.
In one big trade, an investor sold 5,000 August 4 puts for $0.20
and bought 5,000 August 5 calls for $0.55, resulting in a net cost
of $0.35. Volume was more than five times open interest in both
This bullish combinationt trade will mimic a long position in the
shares. It will double the investor's money for every $0.35 that
THC climbs over $5.35 and expose him or her to losses if it falls
The debt-laden hospital stock fell 17 percent to $4.72 yesterday
after management said it began talks to acquire Healthscope, which
operates 43 hospitals in Australia. Analysts questioned the benefit
of the transaction, and traders seized on the opportunity to drive
THC below its 200-day moving average (purple line on chart).
The selling caused the stock to drop below the $5-$6.40 range where
it had been consolidating since September. Management had issued
weak guidance in February and again last month, so the bears may
already have been waiting for a catalyst to target the stock.
In another large bullish trade, investors snapped up more than
11,000 June 5 calls for $0.20 to $0.25. Most of the volume came in
large institutional size during the final 30 minutes of
Overall options volume in THC was 11 times greater than average.
(Chart courtesy of tradeMONSTER)
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