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It's Not What You Know, It's When You Know It


During the month of June, HCA traded 1,196 calls and 1,141 puts per day.


HCA had been trading at a discount to other hospital stocks prior to this weekend's takeover by multiple private equity groups, but the action definitely picked up in the days prior to the leveraged buyout.

During the month of June, HCA traded 1,196 calls and 1,141 puts per day. That hardly qualified it for one of my firm's most active option classes, nor did it hit our Heat Seeker program for unusual activity.

As our 5-day volume totals below shows, our Heat Seeker had over 11,000 calls changing hands on the 19th of July, which was nearly 10 times the average daily volume of the month of June. That was the day that news of a potential deal for HCA fell apart over concerns about HCA's $11 billion debt caused the speculative feeding frenzy and thus, the unusual activity on Wednesday (July 19), Thursday (July 20) and Friday (July 21).

Initially, we thought the news had broken after the bell on Wednesday July 19th, which would have made the trades done that day suspicious rather than just followers of known data. But it still leaves both Monday the 17th and Tuesday the 18th as rather interesting datapoints, as both days were substantially above the average daily volumes of the rolling monthly data.

Both days, Monday and Tuesday, show much heavier than normal activity on our Heat Seeker for HCA calls. But on Friday July 14th, 10,332 calls changed hands in HCA versus a rolling monthly average of 1,196 call options. That's over 800% more than normal activity and that ahead of the news that private equity firms were stalking the hospital and rehabilitation company! Shares of HCA were trading in a $1 range, bouncing between $43.02 and $44 on Friday the 14th, or $6 under where they peaked this morning on news of the takeover.

Option Volume in HCA Calls & Puts

Friday July 21: 13,599 calls versus 6,777 puts.
Thursday July 20: 38,630 calls versus 16,143 puts.
Wednesday July 19: 11,430 calls versus 7,979 puts.
Tuesday July 18: 1,998 calls versus 1,021 puts.
Monday July 17: 4,649 calls versus 1,790 puts.
Friday July 14: 10,332 calls versus 3,898 puts.

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No positions in stocks mentioned.
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