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HCA sees nervous trades at key level

By: optionMONSTER
Posted: 10/1/2012 5:32:00 AM
Referenced Stocks: HCA

Investors fear a pullback in HCA now that the hospital stock has rallied back to a key level.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 11,000 November 30 puts for $0.80 to $0.85. Volume was more than quadruple the open interest in the strike at the beginning of the session, indicating that a new position was initiated.

HCA rose 0.61 percent to $33.25 on Friday and is up 17 percent in the last month. The shares have returned to the price range where they traded in early 2011 before crashing along with the rest of the market amid the budget showdown in Washington.

Some traders may view that chart pattern as an indication of resistance, potentially causing HCA to reverse lower. If it does, those puts could appreciate quickly in value.

The buyer may also own the shares and may be using the contracts to protect the long position . (See our Education section for more hedging strategies.)

Overall option volume in the name was 5 times greater than average in the session, according to the Depth Charge. Puts outnumbered calls by a bearish 58-to-1 ratio.