Markets

Put seller sees Medco on solid ground

MedcoHealth Solutions got slammed last month on a big customer loss, but one investor is now betting that it's on solid ground.

optionMONSTER's tracking systems detected the sale of about 2,500 June 57.50 puts for $1.20. The move obligates the seller to buy MHS for $57.50 if it's below that level on expiration, although the credit earned today would reduce their outlay to $56.30.

The pharmacy-benefits company is down 0.62 percent to $57.43 in late morning trading, and is down 11 percent since mid-May. Most of that drop occurred on May 27, when it lost a large federal-government contract to CVS Caremark. That followed downside in March, when MHS was dropped by California's giant state-pension system.

The stock is now holding support at its 200-day moving average and attempting to make a higher low than earlier in the year.

Despite the bad news on MHS, the pharmacy-benefits industry remains in a longer-term secular uptrend as health administrators shift patients to lower-cost medicines. The sector is also expected to benefit as a large number of major drugs go generic in the next year.

The put selling accounted for most of the options volume in MHS so far today. (See our Education section)

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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