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Strategy bets on lower volatility in HCA

Chris McKhann (chris.mckhann@optionmonster.com)

A trader is looking for lower volatility in HCA Holdings.

optionMONSTER systems show that 7,000 each of the June 37.50 calls and puts traded yesterday for $2.05 and $2 respectively. The volume was multiples of the previous open interest at each strike, clearly indicating that this is a new position.

Given the prices and market action, this appears to be a short straddle position. This trade is designed to profit from range-bound trading around the current stock price and/or volatility that is lower than that implied by the options. (See our Education section)

HCA gained 3.13 percent to close at $37.87 after falling to its lowest level since late February earlier in the day. The health-care provider hit an all-time high of $41.50 at the start of the month but then pulled back and has been trading sideways with its 50-day moving average since.

More than 26,000 HCA options changed hands yesterday, compared to a daily average of 4,400 contracts.

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