Nursing Homes Attract Investors Ahead of Ruling
Dow Jones Newswires</br></br>Option traders looking for action found it in the nursing-home sector.</br></br>Traders priced in expectations of greater stock-price volatility into options on Kindred Healthcare Inc. and Manor Care Inc., two nursing-home operators. A proposed Medicare rule that could lower per- day reimbursement rates for nursing care -- a source of both companies' revenues -- is expected any day.</br></br>The volatility implied by the nursing-home companies' short-term option prices jumped, suggesting that traders expect the stocks may soon make a move. Concerns about reduced Medicare reimbursement rates prompted Jefferies & Co. to lower its investment rating on Kindred and the stock-price target on Manor Care about three weeks ago.</br></br>Kindred stock rose 69 cents to $34.53 in double its average daily trading volume in 4 p.m. New York Stock Exchange composite trading. Investors sold May 35 calls -- receiving an upfront payment in return for agreeing to sell the stock at $35. These calls traded 2,014 contracts, compared with 871 previously outstanding, and rose 60 cents to $1 at the American Stock Exchange.