Humana has been drifting lower since mid-January, and now one
investor is positioning for the shares to rally into early 2011.
optionMONSTER's Heat Seeker tracking system detected two similar
bullish trades on the health insurance stock. In the first, an
investor bought 1,500 January 55 calls for $2.05 and sold a
matching number of January 40 puts for $3.10.
About 15 minutes later, some 2,500 January 50 calls were bought for
$3.50--also against the January 40 puts. The first transaction
produced a credit of $1.05 and the second cost a debit of $0.40.
HUM rose 1.14 percent to $45.17 yesterday but is down 12 percent in
the last three months. Earnings matched forecasts the last time it
reported results on Feb. 1, and management provided bullish
guidance. The company, which has also been cutting jobs, will issue
its next earnings report in the pre-market on April 26.
The option trades, known as combination strategies, resemble
ownership in the stock. The larger transaction will double the
investor's money for every $0.40 that HUM closes above $50.40 on
expiration, and the second trade will make money anywhere over $55.
The positions will expire worthless if the stock fails to reach
those levels and will generate losses below $40. The activity
pushed overall options volume in HUM to five times greater than
(Chart courtesy of tradeMONSTER)
Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.