Noteworthy Tuesday Option Activity: MEDP, THC, AZO

Tenet Healthcare (THC) saw 5,517 options contracts trade today — roughly 551,700 underlying shares, about 58.6% of its 30‑day ADV (940,865) — with heavy activity in the Feb 20, 2026 $200 call (1,818 contracts, ~181,800 shares). AutoZone (AZO) traded 1,001 contracts (~100,100 shares), about 57.4% of its 30‑day ADV (174,495), led by 504 contracts in the Feb 20, 2026 $4,000 call (~50,400 shares). The flows indicate concentrated call positioning in both names ahead of Feb‑2026 expirations, signaling speculative/ directional bets or hedging demand that could create short‑term price pressure or volatility.

Analysis

Market structure: The outsized Feb‑2026 call flow in THC (551,700 shares ≈58.6% ADV) and AZO (100,100 shares ≈57.4% ADV) implies concentrated, institutional-sized directional or tail-hedge positioning. Primary beneficiaries are call sellers/market‑makers (collecting premium) and any liquidity providers who can hedge delta by buying underlying shares, which can mechanically create upward pressure; losers are short‑term liquidity takers who absorb inventory risk and retail buyers facing wider spreads. Cross‑asset impact should be modest but monitor THC credit spreads — meaningful positive equity re‑rating could tighten hospital credit by 20–50bp over months; FX/commodities exposure is negligible.

Risk assessment: Tail risks include regulatory reimbursement shifts for THC (Medicare/DRG policy) and demand shock/EV aftermarket disruption for AZO; low‑probability M&A or capital raise activity could also explain LEAP buying. Time horizons: delta‑hedging can move stock in days, IV repricing and flows play out over weeks–months, while fundamental upside/downsides unfold over quarters. Hidden dependency: large LEAP buy could be non‑directional (collar/structured notes), so persistent flows >30% ADV without news suggest genuine directional risk; catalysts include earnings, analyst coverage changes, and any M&A rumor.

Trade implications: Use defined‑risk option structures to capture asymmetry. For THC, capitalise on potential dealer delta‑hedging by buying a Feb‑2026 call spread sized 0.5% portfolio (e.g., $200/$260) to limit downside while keeping upside participation; set tactical stop if position loses 100% of premium or underlying drops >15% in 10 days. For AZO, selling a small 2026 bear‑call spread against the $4000 strike (0.25% notional) sells premium where buyers appear speculative; trim if AZO rallies >20% or open interest doubles.

Contrarian angles: The market may be misreading LEAP flow as straightforward corporate bullishness; historically, clusters of long‑dated OTM calls often reflect cheap tail hedging or structured issuance rather than imminent fundamentals (see large LEAP prints ahead of 2018/2019 sector hedges). If no corroborating fundamental news within 5 trading days, probability of mean reversion increases — downside of following headline flow is elevated. Action trigger: treat a sustained 10‑day rolling call volume >30% ADV as confirmation to scale into directional exposure, otherwise favour premium selling and defined‑risk spreads.

Key Decisions for Investors

• Establish a defined‑risk long in THC: allocate 0.5% of portfolio to Feb‑2026 $200/$260 call spread (max loss = premium). Enter within 2 weeks; exit/close if THC falls >15% in 10 trading days or if implied volatility for those strikes rises >50% from today.
• Sell premium on AZO: allocate 0.25% of portfolio to a Feb‑2026 $4000/$4200 bear‑call spread (credit). Enter immediately given heavy call buying; close if AZO rallies >20% or if 10‑day call volume >100% of ADV.
• Relative healthcare pair: go long THC equity 1.0% vs short HCA 0.8% (dollar‑neutral) over 3–6 months to exploit potential idiosyncratic re‑rating in Tenet; stop‑loss: overall pair move against position >10% intraday; take‑profit: pair outperformance >30%.
• Flow‑trigger rule: if 10‑day rolling call volume for THC or AZO remains >30% of ADV for five consecutive trading days, increase directional option exposure by +0.5% portfolio (scale into same structures); if heavy flow reverses (volume drops below 15% ADV for 3 days), unwind incremental exposure.