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Short-Term Bears Swarm CVS Caremark Corporation (CVS)

CVS Caremark Corporation is struggling following its debt-purchasing announcement

by 8/7/2014 3:01 PM
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CVS Caremark Corporation (NYSE:CVS) puts are flying off the shelves this afternoon, trading at six times the typical intraday pace. Short-term contracts are especially in demand, as evidenced by the pharmacy stock's 30-day at-the-money implied volatility, which has surged 14.6% to 16.6%.

Most active among CVS options is the August 76 put, where roughly 4,100 contracts are on the tape. It appears these puts are being bought to open at a volume-weighted average price (VWAP) of $0.58. Therefore, in order for the traders to profit, the stock must be sitting south of $75.42 (strike less VWAP) at the end of next week, when the front-month options expire. Additional gains can be had on a move down to zero, while potential losses are capped at the initial premium paid, should the options expire out of the money.

On the charts, CVS Caremark Corporation (NYSE:CVS) is off 1.4% this afternoon to trade at $75.96 -- unlike sector peer Walgreen Company (NYSE:WAG), which is up 2.4% on a mixed round of brokerage notes, following its decision to remain in the U.S. Meanwhile, on the fundamental front, CVS earlier offered to repurchase up to $1.5 billion in debt.


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