$CYH bulls make healthy profits

Option traders are making healthy profits today on bullish positions opened in Community Health Systems (CYH) ahead of its earnings report.

On Oct. 16, Market Rebellion’s Unusual Activity Service flagged the purchase of 4,600 November $6 calls for $0.30 to $0.35 with shares at $4.82. This was clearly fresh buying, as open interest in the strike was only 7 contracts before that session began.

Those calls have traded for up to $2.15 this session, at least 6 times their purchase prices. The stock rallied 67.43% at the same time, a large move but still nowhere near that of its options.

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.

CYH spiked higher by 16.64% to $8.27 today, setting new three-year highs. The hospital operator topped earnings estimates after the market closed on Tuesday last week.