Caution reigns in WellCare strategy
David Russell | [email protected]
optionMONSTER's Depth Charge tracking program detected the purchase of almost 5,100 February 40 puts against open interest of just 286 contracts. Premiums rose from $0.50 to $0.75 as the trades crossed, with the largest blocks priced for $0.70 and $0.75.
Those puts lock in the price where investors can sell shares in the health insurer, so they can appreciate in value if the stock declines. They might have been used by an investor looking to hedge a long position in the name or by a speculative bear who doesn't want the risk of shorting the stock. (See our Education section for more on how options can be used to manage trade more safely than buying and selling common equity.)
WCG is down 0.47 percent to $46.33 in morning trading. It gapped lower on Oct. 31 after earnings missed expectations and management lowered full-year guidance. Shares have been languishing since while remaining below their 50-day moving average, which could be leading some chart watchers to expect more downside.
The company's next earnings report is scheduled for Feb. 13 before the bell.
Total option volume in WCG is 7 times greater than average so far today, with puts outnumbering calls by almost 500 to 1.