U.S. Markets closed

HCA draws bulls for second day

David Russell (david.russell@optionmonster.com)

The bulls are running rampant in hospital stocks.

Just yesterday, we cited aggressive upside positioning in Community Health Systems and HCA . The paper continues today as a winning bet is rolled higher in HCA.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 November 45 calls for $1.20. The trade came just seconds after a block of 2,000 November 41 calls were sold for $3.60 against previous open interest.

It looks like the investor came into the session long the 41s. He or she then exited those contracts and rolled up to the 45s. They collected a credit of $420,000 in the process and remain exposed to continued upside in the name. In fact, they stand to profit even more from a big rally because they increased the number of contracts owned.

Long calls lock in the price where the stock can be purchased, providing cheap exposure to the upside. Investors often roll from one contract to another to optimize returns and manage risk. See our Education Section for more on how you can do more with less money using options instead of common stock.

HCA is up 2.81 percent to $43.95 in afternoon trading. It spent most of the year consolidating between $36 and $41 but has now broken above that range. Some chart watchers may consider that evidence of a breakout.

Total option volume is already more than double its full-session average, according to the Heat Seeker. Calls outnumber puts by a bullish 47-to-1 ratio.

Yesterday's investors are also sitting pretty because they bought the November 44s for $1. Those same contracts are worth $1.65 today. The CYH December 43 calls cited for $1.85 traded up to $2.90 as well.

More From optionMONSTER