Options Trading News

October 9, 2012  Tue 1:38 AM CT

HCA Holdings slipped yesterday, and a three-way trade is looking for shares of the health-care company to fall further.

Total option volume in HCA was 32,822, compared to a daily average of 6,000 in the last month. Almost all of the action was in three large put prints.

First a trader bought 10,000 November 28 puts for $0.80 against open interest of more than 12,000. At the same time he or she sold 10,000 November 25 puts for the bid price of $0.25 against open interest of just 75, so it was clearly new activity. About 45 minutes later, 10,000 October 32 puts were sold for the bid price of $1.10 against open interest of more than 11,000.

So it appears that the trader closed that October put position, which expires at the end of next week, and opened a November put vertical spread. The strategy would be looking for HCA to drop to the $25 level, where the stock last traded on a closing basis at the start of June. (See our Education section)

HCA was down 2 percent yesterday to close a $31.32. Shares traded above $34 on Monday and Tuesday of last week, the first time they had been at that level since July 2011. The stock based at $24 in early June and at $26 in early August.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

Options Academy: More on the Covered Call Strategy

Last week, we talked about the Covered Call and the misconceptions that surround it. We spoke about how an investor must realize that the Covered Call is actually a premium collection strategy and not so much a directional one. If an investor can grasp this idea, the investor stands to do a heck of a lot better in the strategy than they currently do.

View more education articles »