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HCA draws buyers following pullback

By: optionMONSTER
Posted: 7/27/2012 4:16:00 AM
Referenced Stocks: HCA

HCA has been pulling back after a surge last month, and the bulls are checking in.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,000 September 27 calls for $1.40 and the sale of an equal number of September 27 puts for $1.75. Volume was more than 7 times open interest at both strikes.

The trader collected a credit of $0.35 and will earn infinite profits in the long calls if the hospital stock rallies. But if the shares don't rise, he or she will face potential losses because of the short puts.

A block of 3,000 August 26 calls was purchased for $1.30 less than an hour later as another investor opened a bullish position as well.

HCA slipped 0.96 percent to $26.90 yesterday and has been grinding in a range all year. It rallied on June 28 after the U.S. Supreme Court upheld the Patient Protection and Affordable Care Act, which is expected to reduce the industry's losses from unpaid hospital bills, but has been drifting lower since.

The next big event on the calendar is the release of second-quarter results on Aug. 6. The last earnings report beat expectations on May 3, and management raised its full-year profit outlook.

Disclosure: I own HCA shares.