Strategy looks for more gains in HCA
David Russell | firstname.lastname@example.org
optionMONSTER's Heat Seeker tracking systems detected the sale of 5,500 July 26 calls for $4.72 and the purchase of 7,500 August 30 calls for $2.10. Volume was below open interest in the July options but not the August contracts, which suggests that an existing position was rolled from one contract to the other.
The trader probably bought the shorter-dated calls when the hospital stock was much lower. Adjusting the position today lets him or her recover about $1 million of capital but it also keeps them in the name in hope of continued upside. In addition to owning more calls, but the investor now has an additional month to profit from a rally.
HCA is up 4.82 percent to $30.89 in early afternoon trading. The stock had spent most of this year in a narrow range but exploded higher yesterday after the Supreme Court upheld President Obama's health-care law. That's potentially good news for the name because it's expected to protect hospitals from unpaid medical bills.
Some chart watchers may believe that HCA will push back toward $34, a level where it traded before gapping sharply lower in July 2012.
Overall option volume is 10 times greater than average so far today, with calls outnumbering puts by more than 3 to 1.