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Limited upside seen for McKesson

David Russell (david.russell@optionmonster.com)

McKesson is trying to bounce, but one investor is getting tired of the name.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 2,500 August 185 calls for $6.70 and the sale of 5,000 August 190 calls for $3.80. Volume was more than twice the previous open interest in each strike, which indicates that new positions were initiated.

The trader almost certainly owns the pharmacy-benefits stock and used the options to manage an exit if it rallies. He or she collected $0.90 up front and will receive an additional $5 if it climbs to $190, but above that level the trader is effectively short the shares.

The strategy is known as a ratio spread because twice as many contracts were sold than the number bought. It's often used to protect or exit long shares. (See our Education section)

MCK fell 1.43 percent to $186.21 yesterday but has been trying to work its way higher since the middle of June. It peaked around $190 early last month, which likely explains why yesterday's trader chose that level for an exit price. The stock has roughly doubled in the last two years, so he or she might also think that it's running out of steam for now.

Overall option volume in the name was 22 times greater than average in the session, with calls accounting for 91 percent of the total.

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