HCA has been on a tear, but one investor is playing it safe.
optionMONSTER's tracking programs detected a surge of volume in the Tennessee-based hospital operator as a highly conservative in-the-money strategy was adjusted. A block of 5,115 June 23.50 calls was bought for $14.60 and the same number of September 31 calls was sold for $8.30. Volume was below open interest in the April contracts, indicating that an existing position was closed and rolled forward in time.
The investor almost certainly owns HCA shares and has been using covered calls to manage the trade. Yesterday's transaction let him or her raise the selling price of the stock by $7.50. The trader paid $6.30 to make the adjustment and is now obligated to hold the shares for an additional three months.
HCA fell 1.6 percent to $37.61 yesterday, which makes the calls deep in the money. It would require a drop of more than 17 percent for the investor's profits to be at risk. While unusual, such strategies do appear occasionally as traders respond to low interest rates by crafting positions more akin to bonds than equity. (See our Education section for more on how to turn time into money with calls and puts.)
Total option volume in the name was 6 times greater than average in the session.
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