HCA Bulls Are Rolling for More Gains

NEW YORK -- Traders are sticking with HCA (HCA) after a good earnings report last week. 

OptionMonster's Heat Seeker system shows that about 3,000 May 77.50 calls expiring Friday were sold for 47 cents while the same number of June 80 calls were bought for $1.42 on Wednesday. Volume was below open interest in the shorter-dated contracts, which indicates a long position was rolled forward in time. 

The trader is closing the May calls, which expire at the end of this week, and is opening a new position one month later at a higher strike for a net cost of 95 cents. Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential to generate significant leverage. 

HCA ended Wednesday's session up 1.59% to $77.73. The hospital operator beat earnings and revenue estimates on May 5 thanks to higher admissions. Management also raised its outlook and announced a $500 million capital-expenditure plan.

Wednesday's overall volume in the name was quadruple its daily average for the last month, with calls accounting for a bullish two-thirds of the total. 

-- Written by Mike Yamamoto of OptionMonster

Yamamoto has no positions in HCA.

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