Will Health Net jump with earnings?
David Russell | email@example.com
optionMONSTER's Heat Seeker monitoring system detected the purchase of some 2,000 June 32.50 calls for $0.54 and the sale of an equal number of June 35 calls for $0.30. There was no open interest at either strike before the trade appeared, indicating that new money was put to work.
The trade cost $0.24 and has the potential to earn a profit of more than 900 percent if the California-based health insurer closes at or above $35 on expiration. That's less than 25 percent above its current price, which shows the kind of leverage that can be generated with options. (See out Education section for more on the strategy, known as bullish call spread.)
HNT is off 0.27 percent to $28.21 in afternoon trading. The stock gapped violently lower almost a year ago after a spike in medical claims caused profit to miss expectations by a wide margin. Shares bottomed out in August and have been working their way higher since.
Today's call spread is looking for the stock to fill that bearish gap from May 2012, something that could happen if there's a good earnings report on Monday morning.
Total option volume is 47 times greater than average in the stock, according to the Heat Seeker. Only 12 puts have traded in the session, a reflection of the bullish sentiment.