Unusual Options Activity: Tenet Healthcare Corporation (THC)

Shares of healthcare services company Tenet Healthcare Corporation (THC) have been steadily rising over the past year. One trader sees the possibility for further gains in the next few weeks.

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  • That’s based on the May $85 calls. With 44 days until expiration, 2,550 contracts traded compared to an open interest of 100, for a 25-fold rise in volume on the trade. The buyer of the calls paid $4.10 to enter the position.

    The stock recently traded near $82.50, so shares would need to rise about $2.50, or just over 3 percent, for the option to move in-the-money. Given the steady rise in shares, which are up about 71 percent over the past year, that move looks easily achievable. It would still leave the stock under its 52-week high of $92.65.

    Despite the strong rise in share price, revenue is slightly down over the past year with a 1 percent drop, and earnings have tumbled 40 percent.

    Action to take: Shares trade at about 13 times earnings, and healthcare spending is likely to continue rising. That makes shares a reasonable buy, although investors won’t get paid a dividend on this name in the space.

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  • For traders, the May calls have enough time to play out for mid-to-high double-digit gains, particularly on a rally in shares in the coming weeks. And shares could soar following the company’s next earnings report on April 20.


    Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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