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Option Bulls Rush HCA Holdings Inc (HCA) Amid Rally

Long-term speculators expect higher highs from HCA Holdings Inc

by 7/16/2014 1:38 PM
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HCA Holdings Inc (NYSE:HCA) raised its full-year earnings guidance this morning, and the market is responding strongly to the news. So far, shares of the hospital operator are up more than 9% to trade at $60.25, after earlier touching record high of $61.04. What's more, the stock saw its price target lifted at Deutsche Bank and Susquehanna this morning. Not surprisingly, bullish betting has also picked up in HCA's options pits, as calls are trading at 18 times their usual intraday pace.

Getting into the details, the equity's most active option is the January 2015 65-strike call, where more than 10,500 contracts are on the tape -- mostly the result of a pair of block trades. According to Trade-Alert, these out-of-the-money calls are likely being bought to open at a volume-weighted average price (VWAP) of $2.22. As such, breakeven at January 2015 expiration is $67.22 (strike plus VWAP), with additional gains north of this mark. Meanwhile, the maximum risk is capped at the initial premium paid, should HCA Holdings Inc (NYSE:HCA) finish below $65 at expiration.


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