Bears Are Blitzing This Stock Before Trump Announcement

DVA traders are buying July puts after a Politico report

Jul 9, 2019 at 10:46 AM
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Dialysis concern DaVita Inc (NYSE:DVA) is the worst stock on the S&P 500 Index (SPX) this morning, after Politico said President Donald Trump will announce a shake-up to the kidney care market tomorrow. More specifically, the administration wants to encourage more at-home dialysis treatments and revamp the payment model, sources said. As such, DVA stock has gapped 7.5% lower to trade at $51.35, and bearish options traders are coming out of the woodwork.

Prior to today, DVA shares had been on a tear, rallying roughly 28% from their May 31 six-year low of $43.40 to yesterday's close at $55.51. However, the stock ran into a wall in the form of its 200-day moving average, and today is pacing for its worst session since April 17. Further, DVA stock volume is on track for an annual high.

Already today, DaVita has seen nearly 5,000 puts cross the tape -- 10 times its average intraday put volume, and more than double its average daily put volume. In fact, put volume is pacing for the 99th percentile of its annual range. For comparison, fewer than 700 DVA calls have crossed the tape.

Most active is the July 50 put, where it looks like traders are buying the options to open. By doing so, the buyers expect DVA shares to sink beneath the $50 level by the close on Friday, July 19, when front-month options expire.

However, even before today, options traders were initiating bearish bets at a rapid-fire rate. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), investors bought to open nearly four DVA puts for every call in the past two weeks. The 10-day put/call volume ratio of 3.95 is in the 95th percentile of its annual range, underscoring a healthier-than-usual appetite for long puts of late.


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