Healthcare Bill Revamp Draws Options Traders to Community Health, HCA Stocks

Healthcare stocks are trading lower today on rumors House Republicans may take another crack at an Obamacare repeal

Apr 4, 2017 at 2:52 PM
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Hospital stocks are trading lower today, amid reports that a healthcare bill to repeal and replace Obamacare could have new life. Specifically, Vice President Mike Pence and White House Chief of Staff Reince Priebus have been working with House Republicans to craft a new bill, after the previous one was pulled due to lack of support. Among those selling off on the news are Community Health Systems (NYSE:CYH) and HCA Holdings Inc (NYSE:HCA) -- and options traders are taking a fresh swipe at shares of both stocks.

Put Buyers Pounce On Community Health Shares

CYH was off 6.7% earlier, but found a foothold at its 50-day moving average, and was last seen trading down 1.7% at $8.53. Though the stock briefly broke out above congestion at its 200-day moving two weeks ago amid the healthcare bill hype, but the stock has since moved back below here. What's more, the shares remain stuck below their late-October pre-bear gap levels.

cyh stock daily chart april 4

Against this backdrop, CYH options traders are targeting puts at a quicker-than-usual clip today, with volume running at three times the average intraday rate. It looks like one speculator may have rolled her long June 6 puts up to the 8 strike. More broadly, the May 8 strike is home to Community Health Systems' top put open interest position among near-term options, with more than 4,000 contracts outstanding. There's been notable buy-to-open activity here, too, meaning put buyers are bracing for a move below $8 in the next several weeks.

HCA Stock Finds Technical Support

HCA stock is trading down 2.2% at $87.39, after earlier skimming the $86.25 neighborhood. Nevertheless, the shares quickly bounced from this area, which coincides with their 20-day moving average, and a 50% Fibonacci retracement of their March rally. Longer term, the stock is up 18% year-to-date, and hit an annual peak of $91.03 on March 27.

hca stock today

In the options pits, volume is crossing at 1.8 times the average intraday rate, with nearly 5,000 contracts on the tape at last check. While one trader may possibly be buying to close their June 77.50 puts, another speculator may potentially be buying to open April 91 calls. Specifically, it looks like a block of 1,000 April 91 calls may have been purchased for $50,000 (number of contracts * $0.50 premium * 100 shares per contract). If this is the case, the goal is for HCA Holdings Inc to surge back into 12-month-high territory in the next two weeks.


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