Call prices soar 8-fold in $THC

Bullish option traders racked up big profits in Tenet Healthcare today thanks to follow-through on strong quarterly results.

On April 24, Investitute’s market scanners detected the purchase of 4,500 June $30 calls for $0.40 with shares at $23.88. This was clearly a new position, as open interest in the strike of 5,486 contracts was tabulated against call buying cited by Investitute’s scanners just one session earlier.

Those calls traded for $3.20 during today’s session, 8 times their purchase price. The stock rallied 34.5% in the same time period, a large gain but well below that of its options. It was the second winning trade in the name posted on Investitute in the last four days.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

THC reached a 52-week high of $32.11 this morning but pulled back to close at $31.49, off 0.63% on the session. The health-care service provider topped quarterly estimates on Monday and raised its full-year outlook, sent shares progressively higher on the week.