Markets

Position keeps Humana on tight leash

One investor is keeping Humana on a tight leash.

optionMONSTER's tracking systems detected an unusual flurry of activity in the health-insurance stock yesterday: A block of 2,337 December 82.50 calls was bought for 4.20 and an equal number of January 85 calls was sold for $4.30. About 2,000 January 77.50 puts were bought seconds later for $1.30.

The trader probably owns HUM shares and is using the options as a hedge. He or she had apparently sold the December contracts at a previous date, and by rolling them received the right to collect an additional $2.50 on the stock. They're also using the puts as protection in case HUM suffers an unexpected sharp decline in the meantime.

The trade combines elements of protective-put , covered-call , and collar strategies that are popular in the option market. (See our Education section)

HUM rose 0.3 percent to $86.82 yesterday and is up about 14 percent in the last three months.

Overall option volume was 6 times greater than 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.

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