Market News

December 1, 2016  Thu 8:14 AM CT

Some health-care companies are showing signs of life in the market's weakest sector.

The SPDR Health Care Fund surged along with the rest of the S&P 500 immediately after the presidential election but has given up all of those gains. Although investors and analysts initially believed that a Trump White House would be more favorable to the sector than a Clinton administration, questions have persisted about issues ranging from Obamacare to drug pricing.

In recent days, however, our tracking systems have detected some bullish option activity in two leading industry names:

  • On Monday UnitedHealth attracted the purhcase of 7,101 January 160 calls in one print for $1.50 against open interest of 4,530 contracts. Those calls more than doubled in value in the following session.
  • Then yesterday Humana saw 2,525 Weekly 215 calls expiring on Dec. 9 purchased for $4.40 at the same time yesterday. This was also a new position, as volume was more than 10 times the open interest in the strike.

Long calls lock in the price where investors can buy stock, allowing them to profit from a rally with limited capital at risk. Their cheap cost can also generate significant leverage on a percentage basis if shares move in the right direction. (See our Education section)

UNH rose 0.87 percent to $158.32 yesterday and is up 15 percent in the last three months. HUM gained 1.26 percent to $212.64 yesterday and is up 23 percent in the last month.

Although these names have rallied, the screen shot below from our proprietary ResearchLab market scanner shows the sector's underperformance:

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