Options Trading News

August 14, 2013  Wed 3:47 AM CT

As LifePoint Hospitals nears a key support level, traders are looking for a rebound by Thanksgiving.

optionMONSTER's Heat Seeker tracking system detected the purchase of 1,845 November 50 calls yesterday, led by a block of 1,750 that went for $1.95. This is clearly fresh buying, as open interest in the strike was just 115 contracts before the trades appeared.

These long calls, which lock in the purchase price for the stock, are betting that LPNT will really by mid-November. The contracts could be sold earlier if premiums rise with a rally before then, but they could expire worthless if shares remain below $50. (See our Education section)

LPNT fell 0.84 percent yesterday to close at $48.18, not far from support above the $47 level in place since late April. The company, which operates acute-care hospitals, was trading above $51 earlier last month but missed second-quarter estimates and lowered earnings guidance on July 26.  

Yesterday's call buying made up almost all of the option volume in LPNT, which has averaged a mere 14 contracts a day for the last month. Only 2 puts were traded in the session, further reflection of the day's bullish sentiment.

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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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