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November 7, 2012  Wed 9:17 AM CT

THC: SEE CHART GET CHAIN FIND STRATEGIES
Tenet Healthcare is jumping this morning after President Obama's reelection, but one trader sees limited gains from here.

A trader sold 5,000 November 26 calls in a single print of $1.05 when the stock was trading at $26.40, according to optionMONSTER's tracking systems. The volume was more than 10 times the open interest at the start of the session, so this is a new opening position.

The calls were almost certainly sold against a long stock position because, if it weren't, this position would have huge upside risk. Traders often sell short term in-the-money calls if they see limited further upside and would like to sell their stock, but collect a premium to do so. The call selling also gives a slight cushion to the downside. (See our Education section)

THC is up 6.09 percent to $26.47. Although the hospital operator remains below its intraday highs from the first day of this month, it is on pace for its highest close in more than a year.
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Market Level Making You Nervous, Huh? Part 3

In last week's article, we discussed how important the extra cash you save by using the Stock Replacement Strategy over buying the actual stock is! That extra cash in our account instead of being unnecessarily tied up in a stock position allows us to buy the puts we would need to protect our downside in the case of a major sell-off.

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