By David Russell
Option activity is heating up for a second day in Universal Health Services (UHS) as investors look for the stock to rally over the next two months.
Our Heat Seeker tracking program detected buying of the March 35 calls, which traded more than 5,800 times for $0.40 against open interest of just 44 contracts. It comes one session after new money flowed into the February 30 calls for $1 to $1.60 and the March 30 calls for $1.70.
UHS is down 1.43% to $30.41 in morning trading after a 4.43% gain yesterday on no news. The stock has been making higher lows and finding support above its 200-day moving average, which chart watchers may consider evidence of a bullish trend higher.
Earnings and revenue exceeded forecasts the last time UHS issued results on Oct. 29, but the shares fell after the company said more patients weren't paying for treatment. Management hasn't yet indicated when the next report will come out.
UHS needs to climb at least 16% by March expiration for the calls purchased today to turn a profit. It would also require the stock to break above $35 for the first time ever. Its previous high of $34.63 was established in September 2008.
Overall options volume in UHS is 13 times greater than average today. Calls account for 86% of the activity.
(Chart courtesy of tradeMONSTER)