Bulls target Cerner ahead of earnings
David Russell | email@example.com
optionMONSTER's Heat Seeker tracking program detected a bullish three-way trade in the health-care IT company. It included the purchase of the May 75 calls for $1.40, while the May 65 puts and May 80 calls were sold for $0.40 and $0.25 respectively.
Roughly 2,000 contracts traded in each, pushing volume to more than double the previous open interest at all three strikes. The resulting position cost $0.75 and will leverage a move to the upside.
The position will earn a maximum profit of about 560 percent if the stock closes at or above $80 on expiration. The investor is also on the hook to buy shares for $65 if they fall below that level.
CERN rose 0.69 percent to $72.76 yesterday, and is up 20 percent in the last three months. Most of that gain occurred after the last earnings report on Feb. 7, when results beat estimates and guidance was stronger than expected.
The company is benefiting as thousands of doctors automate their practices and migrate away from paperwork. CERN has steadily climbed since the early 1990s, and its gains have accelerated since 2009.
Yesterday's bullish trade pushed overall option volume in the name to 18 times greater than average, according to the Heat Seeker.