Molina Healthcare Slammed After 'Unconstitutional' Obamacare Ruling

MOH options are active after the stock's bear gap

by Lillian Currens

Published on Dec 17, 2018 at 2:22 PM
Updated on Jun 24, 2020 at 10:16 AM

At last check, shares of Molina Healthcare Inc (NYSE:MOH) are down 9.7% to trade at $118.94. The dramatic drop is part of a sector-wide spiral on news of a Texas judge deeming the Affordable Care Act (ACA), widely called "Obamacare," unconstitutional, in a ruling issued late Friday. In a statement, Molina said it was "disappointed" with the decision, but recognized "that this is a first step in what will be a lengthy appeals process." 

Before today's bear gap, MOH stock was in the midst of a rebound off its 160-day moving average, after testing the trendline in mid-November. The stock just last week briefly peaked above $140 -- about a 61.9% Fibonacci retracement from MOH's Sept. 24 all-time high of $154.06 to its Nov. 20 intraday low of $114.44 -- but is now trading south of the aforementioned moving average for the first time since early March.

Analysts at Evercore ISI said that Molina, an ACA-exposed managed care provider, and others like it are the most susceptible to volatility after the ruling, but suspects that ultimately the mandate will be overturned. An analyst at BMO Capital also predicted an appeal, calling the sudden drop a buying opportunity for healthcare stocks.

MOH short interest dropped 22.5% in the past two reporting periods, but several holdouts could be cheering today. These bearish bets still account for a healthy 8% of MOH's total available float, or about six days' worth of trading, at the equity's average daily volume.

MOH's dip has options traders more active than usual today. While absolute volume remains light, Molina has seen more than 300 puts and 330 calls change hands -- three times the average intraday pace.

 


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