Cigna is down big, and investors are hoping for a rebound.
The stock had rallied along with most other health insurers earlier in the year as cost controls drive a surge of profitability. It touched a 3-1/2 year high of $52.95 barely four weeks ago, but closed down 1.70 percent to $41.65 on Friday, and is now attempting to hold its same price range from the first three months of the year.
In one big trade, 3,228 September 46 puts were sold for $4.80, and an equal number of August 46s were bought for $4.08. Volume was below open interest in the August contracts, which suggests that a previously established position was rolled forward by one month.
The investor had probably opened the trade when CI was trading much higher in hope it would stay above $46. Now that it's down, he or she adjusting the trade in hope it will rebound. They netted a credit of $0.72, and will make money from shares pushing higher.
The short puts have a strong inverse correlation to the stock price because they're deep in the money. Rolling the position also spared the investor from being forced to buy CI for $46 at yesterday's close. See our Education Section for more.
Earlier in the session, optionMONSTER's screening programs also detected the purchase of 3,000 September 49 calls for $0.32 against open interest of just 212 contracts. That appeared to be an outright bullish trade.
Overall options volume in CI was more than quadruple the daily average in the session.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
