Bet on push back to 52-week lows.
The March 2020 $30 put options on Unum Group (UNM) saw over 2,400 contracts trade against a prior open interest of 145—making for a 17-fold surge in volume.
The short trade is already about $1.00 in-the-money as shares currently trade around $29.00.
The option would need to see shares slide another $1.50 or so before today’s put buyer started to really start making a profit at expiration in the next 122 days.
Unum group provides financial protection benefit solutions such as long-term and short-term disability, group life, accidental death, and other ancillary products to corporations for the benefit of employees. Shares of the company have slid 16 percent in the past year, earnings have declined, but revenues have edged up 1 percent.
Action to take: The company’s position in the ancillary healthcare space is a tenuous one right now, so even with the 3.8 percent dividend yield, it’s a tough sell.
Although it seems as though changes to healthcare are unlikely, anything could happen, and the market is starting to price in the uncertainty ahead of the next presidential election.
For a year-end hedge trade, the March options trade looks like an attractive hedge. While in-the-money put trades tend to offer lower percentage returns to out-of-the-money trades that win, most out-of-the-money trades tend to expire worthless. Traders getting in should look for a mid-double-digit gain before taking profits.
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