Market News

November 26, 2012  Mon 12:04 PM CT

UnitedHealth is down after a profit warning this morning, but one trader believes that the downside potential is limited.

optionMONSTER's tracking systems show that a trader sold 3,000 Weekly 52.50 puts for the bid price of $0.38. The volume was twice the strike's open interest at the start of the session, so it is a new position.

The put selling is a bet that UNH will hold up through the end of the week. The trader is also willing to get long shares if they are below the $52.50 strike price at that time but would have an effective buying price of $52.12, including the credit from the put sale. (See our Education section)

UNH is down 1.62 percent to $53.04 this afternoon. Shares of the health-care company have gained in each of the previous five sessions after bouncing off support at $51.
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Using puts to BUY stock

Puts are an options contract that gives buyers the right to sell their stock for a set price on or before a future date. However, puts can also be an effective way to BUY stock.

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