Market News

December 9, 2016  Fri 6:30 AM CT

Express Scripts plunged on comments from a noted short-seller yesterday, and traders are positioning for more downside potential in coming weeks.

Shares dropped sharply yesterday after Citron Research blamed the pharmacy-benefit management company for high drug prices. Andrew Left, who runs Citron, tweeted: "When @realdonaldtrump tells $ESRX 'you're fired' heads will roll. The culprit behind pharmaceutical price gouging. Price Target $45."

Our systems detected the purchase of about 7,800 December 74 puts for $1.55 to $6.50 yesterday. This represents fresh buying, as open interest in the strike was only 229 contracts before the session began.

Long puts lock in the price where a stock can be sold, so they make money if shares decline. Investors use them to hedge long positions or to speculate on a drop. These contracts are safer than shorting a stock directly, as the options limit the amount of cash that can be lost if shares rally. (See our Education section)

ESRX fell 6.72 percent to $70.75 yesterday but is up 8 percent in the last month. At one point the stock was down 11 percent in the afternoon, making it one of the worst-performing names in the sector.

The company reported mixed quarterly results on Oct. 25 and is expected to announce its next earnings numbers after the close on Feb. 14. Overall option volume in the name was 10 times greater than average yesterday.

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