The healthcare sector has been under pressure lately due to growing talk of Medicare for all. Today, however, many in the group are gaining thanks to proposed changes to Medicare reimbursement rates, including a roughly 3.5% increase in payments to hospitals for inpatient services, which brokerage firm Jefferies says would be the largest increase since 2009. As such, traders are taking aim at Community Health Systems (NYSE:CYH), HCA Healthcare Inc (NYSE:HCA), and Universal Health Services, Inc. (NYSE:UHS).
CYH is trading up 5.2% at $3.53, but could be finding resistance at the 20-day moving average. The shares had been trending lower since their march peak above $5, bottoming recently near the $3 mark, site of their December lows. The stock rarely sees much activity from options traders, but today 2,000 contracts crossed at the June 4 put, which was home to peak open interest coming into today. It's likely that traders are closing out their bearish positions amid today's strong price action.
To say analysts have not liked Community Health Systems would be an understatement. It's rare to see "strong sell" ratings among covering firms, but CYH has seven of them, on top of another "sell" recommendation. There's just one analyst recommending to buy the stock. The hospital manager will report earnings after the close next Tuesday, April 30.
HCA is trading up 3.2% at $123.97, as it tries to push back from last week's nine-month low near $110, which corresponds with the site of a late-July bear gap. Call volume is running at more than four times the daily average, thanks to new positions opening a the weekly 5/3 130-strike and May 135 calls, which have both seen about 1,500 contracts traded so far -- suggesting a more advanced options strategy could be behind the volume.
HCA Healthcare also reports earnings next Tuesday, and has its annual shareholders meeting on Friday. The shares are going up against lofty expectations on Wall Street, evidenced by an average analyst price target of $152.28.
UHS shares are up 2.7% at $131.50, recovering their losses from last week's sell-off, but topping out near the 50-day moving average. The company will report earnings after the close tomorrow, April 25, and the options market is expecting a fairly normal move after the release. Specifically, United Health Services has moved between 4% and 6% following each of its last four reports, and this time the market's pricing in a 5.4% swing. Meanwhile, it seems notable that the top open interest positions are the May 125 put and July 120 put.