Options Trading News

Centene has traded all over the map this year, and today's activity is looking for the next move to be higher.

optionMONSTER's Heat Seeker tracking program detected the purchase of 2,500 December 42.50 calls for $3.70. Equally sized blocks were sold in the December 35 puts for $2.15 and the December 50 calls for $1.35. Volume was more than twice open interest at all three strikes.

The trade cost just $0.20 and is highly leveraged to upside in the healthcare-services company. It will earn a maximum profit of 3,650 percent if CNC closes at or above $50 on expiration and lose money below $35. It combines elements of a vertical spread with short puts to minimize cost.

The stock fell 0.69 percent to $40.58 in afternoon trading. It peaked around $50 in the spring and then proceeded to lose half its value amid concerns about public funding of Medicaid. Sentiment improved in July after WellCare Health Plans purchased Amerigroup. (See researchLAB's page on publicly funded HMOs for more.)

Based on the previous high, today's bullish trade in CNC is apparently looking for a return to the 52-week high around $50 by late this year.

The transaction accounted for almost all the option activity in the name today, and pushed total volume to 13 times greater than average.