Thursday, February 24, 2011

Community Health (CYH) - Earnings Bet to Downside x 2.

CYH is trading $37.95, unched on the day with IV30™ up 0.4%. The LIVEVOL® Pro Summary is below.


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Community Health Systems, Inc. is an operator of hospitals in the United States. The company has earnings today AMC.

The company has traded over 6,500 contracts on total daily average option volume of just 1,015. The largest trade was a Mar 35/41 risk reversal. Based on the prices, I believe with a fair amount of confidence that the trade was buy puts/sell calls and pay $0.15 (but I'm not sure). The next largest trades are in the Mar 39 puts. It looks like 1,500 (ish) purchases. The Stats Tab and Day's biggest trades snapshots are included (below).

The Options Tab (below) illustrates that the calls and puts are mostly opening (compare OI to trade size). When looking down the entire option chain for CYH, the Jun 40 calls have the only OI in the 2,000 range. After that, I don't see anything greater than 500. In English, both the risky and the Mar 39 puts are sizable bets to the downside on earnings out today (or a large hedge to long stock).

The Skew Tab snap (below) illustrates the vols by strike by month.

The skew isn't showing any real change in shape, except that the Mar 41 strike looks bid... which is weird considering the 41 strike was sold (or so I think).

Finally, the Charts Tab (6 months) is below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

Check out the move on 12-10-2010. Here's the news:
Wall Street reacted with delight Friday to Community Health Systems Inc.’s $7.3 billion bid for fellow hospital operator Tenet Healthcare Corp., as Tenet jumped 55% and Community shares climbed more than 13%.
Source: MarketWatch, by Russ Britt

Let's see how this earnings bet turns out...
This is trade analysis, not a recommendation.

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