How these bears are playing Aetna
David Russell | [email protected]
optionMONSTER's Depth Charge monitoring program detected the purchase of about 10,000 April 47 puts for about $1.74 and the sale of an equal number of April 43 puts for $0.50. Volume was more than 8 times the previous open interest at each strike, indicating that this is new activity.
The trade cost $1.24 and will earn a maximum profit of 223 percent if the health insurer closes at or below $43 on expiration. The downside trade may have been the work of an investor looking to hedge a long position in the stock or a speculative bear using the options instead of shorting the stock. (See our Education section for more on the strategy, which is known as a bearish put spread because it leverages a move between two prices.)
AET fell 1.87 percent to $46.69 yesterday and is down 5 percent in the last week. The stock had rallied strongly between last summer and earlier this month but then rolled over after hitting resistance around the same $50 area where it peaked in 2012.
Some 22,800 contracts traded in the session, almost 13 times greater than average. Puts outnumbered calls by more than 18 to 1.