How these bears are playing Aetna

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One investor thinks Aetna is looking sickly.

optionMONSTER's Depth Charge monitoring program detected the purchase of about 10,000 April 47 puts for about $1.74 and the sale of an equal number of April 43 puts for $0.50. Volume was more than 8 times the previous open interest at each strike, indicating that this is new activity.

The trade cost $1.24 and will earn a maximum profit of 223 percent if the health insurer closes at or below $43 on expiration. The downside trade may have been the work of an investor looking to hedge a long position in the stock or a speculative bear using the options instead of shorting the stock. (See our Education section for more on the strategy, which is known as a bearish put spread because it leverages a move between two prices.)

AET fell 1.87 percent to $46.69 yesterday and is down 5 percent in the last week. The stock had rallied strongly between last summer and earlier this month but then rolled over after hitting resistance around the same $50 area where it peaked in 2012.

Some 22,800 contracts traded in the session, almost 13 times greater than average. Puts outnumbered calls by more than 18 to 1.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: AET

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