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February 28, 2013  Thu 3:16 AM CT

HMA: SEE CHART GET CHAIN FIND STRATEGIES
Health Management Associates climbed back to 52-week highs yesterday, and one trader sees a bit more room to run.

optionMONSTER's Heat Seeker system shows that a trader bought 2,500 August 10 calls for $1.64 in volume well above the strike's previous open interest of 416. At the same time, he or she  sold 2,500 August 12 calls for $0.64 against open interest of 747 contracts. About 15 minutes earlier, another 2,500 of those 12 calls traded for $0.60.

This appears to be a call spread that is bullish, though only up to that $12 level. It is also a ratio spread because there were twice as many August 12 contracts as the August 10s. (See our Education section)

HMA was up 3.8 percent to finish the day at $11 even, its highest close in more than a year, though slightly below intraday levels from earlier in the month. Shares of the hospital operator were down at support at $7.50 in early December.

More than 11,000 HMA options traded in total yesterday, compared to a daily average of 460 in the last month.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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