There were a couple unusual options trades on Friday, that we didn’t have a chance to get to before the weekend. The good news is they are still looking interesting this morning as the stocks trade down early. They include HMS Holdings (HMSY), and Asbury Automotive (ABG).
The most interesting trade was in HMS Holdings (HMSY), as a trader bought 3155 September $20 calls. That trader paid $1.10 for the calls. That makes this bet worth $347,000. That’s a pretty large bet on a little known company that trades an average volume of just 774,000.
HMSY opened weak, along with the rest of the market, this morning, and is currently trading at $18.59, down 11 cents. The funniest thing about this trade is that fact that HMS Holdings provides “cost containment services for Government and health care providers”. I don’t understand that at all, as I’m not aware of any Government in the world that try’s to contain costs?
HMSY announces earnings August 8th, so this buy could certainly be related to leakage on earnings. HMSY has a consensus rating of BUY, with a price target of $23.20. Could certainly be possible a price target increase is coming from an analyst, but not highly likely.
The other interesting trade was a small unusual call buy in Asbury Automotive (ABG) on Friday. A trader bough 1,010 of the October $75 calls for $2.00. Total value of this “bet” was $202,000.
Asbury Automotive (ABG) opened well down this morning but is beginning to rebound a little. It still gives you a chance to jump in with the smart money at a good price. The stock is currently down 41 cents to $70.25.
This is a pretty large trade on a thinly traded stock that only trades an average of 200,000 shares per day. Clearly this trader knows something big is coming, likely surprise earnings or analyst upgrade.
However, it’s certainly not earnings as Asbury Automotive (ABG) announced on July 22, and they were very good. But the news is out. These call buys usually involve information not yet released. So we could definitely be looking at an impending analyst upgrade.
The stock is currently rated an OVERWEIGHT so not much room for improvement there. The consensus price target is just $70.90, so there is definitely room for a price target increase from one of the firms that likes to buy up calls before they announce their ratings/price target increases.
We like this one a lot and are locked and loaded, and awaiting the analyst upgrade!