Options Trading News

April 26, 2013  Fri 12:15 PM CT

The bulls want to start next week with a bang as Health Net reports earnings.

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.
Share this article with your friends


Premium Services

Education & Strategy

The art of trading

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.

View more education articles »