Wellcare trader sees little downside
David Russell | [email protected]
optionMONSTER's monitoring systems detected the sale of almost 2,100 September 60 puts for $0.85. Volume was more than twice previous open interest at the strike, indicating that new positions were initiated.
Selling puts obligates the investor to buy a stock if it's below a certain level on expiration, while letting him or her collect a credit in return. The strategy is used when they like a company but don't want to shell out cash getting long at current levels. It also reflects a belief that downside is limited. (See our Education section)
WCG rose 0.51 percent to $67.40 yesterday and is up 31 percent in the last two months. Much of that rally occurred on Aug. 7 after the health insurer reported strong quarterly results and raised guidance.
The shares peaked above $60 in April and August. That could make some chart watchers think that level will now become support, helping to explain yesterday's put sale.
Total option volume was almost 4 times greater than average in the session.