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Is Health Management stuck at key level?

Health Management Associates has fought its ways back to a key chart level, and one investor apparently thinks that it needs to take a pause.

optionMONSTER's tracking systems detected the sale of 10,000 August 11 puts for $0.90 and 10,000 August 11 calls for $0.45. Volume was more than triple open interest in both strikes.

The transaction resulted in a credit of $1.35, which the trader will keep if the hospital stock closes at $11 on expiration. Gains will erode on either side of that level and turn to losses below $9.65 and above $12.35.

Known as a short straddle, the transaction was a market-neutral strategy that profits from the passage of time rather than a directional move higher or lower. (See our Education section)

The investor appears to have chosen roughly the same price area where HMA traded immediately before suffering a large bearish gap in July 2007. Option trades often appear at such points because technicians use chart levels to increase their odds of success.

In the case of yesterday's trade, they may expect that many investors will look to dump the stock now that it's returned to its old level. That causes resistance.

HMA fell 3.22 percent to $10.53 yesterday. The straddle pushed total options volume in the name to more than 300 times the daily average.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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