Option Bulls Hone In on Soaring Humana Inc. (HUM)

Insurance issue Humana Inc (NYSE:HUM) is 5.9% higher at $165.30 -- and earlier reached a record high of $165.51 -- and option bulls are coming out in droves. Overall option volume is running at three times the typical intraday pace, with calls outnumbering puts in early afternoon action.

Most active is the March 155 call, which is now in the money by more than 10 points. Buyers will make money the higher HUM climbs north of $164.30 (strike plus volume-weighted average price of $9.30) by the close on Friday, March 20, when the newly front-month options expire. Meanwhile, buy-to-open activity has also been detected at the May 195 call, which will move into the money if HUM extends today's ascent and topples $195 within the options' lifetime.

Today's affinity for short-term calls is more of the same for HUM. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.70 stands higher than just 24% of all other readings from the past year, suggesting near-term traders are more call-biased than usual at the moment.

Late Friday, U.S. health officials proposed a cut in Medicare Advantage health plans next year, but estimated overall revenue for insurers to increase 1.05%, on average (subscription required). Meanwhile, Humana Inc (NYSE:HUM) today projected a Medicare funding drop of 1.25% to 1.75% for the company in 2016 -- in line with expectations, according to media reports. Against this backdrop, HUM and sector peer UnitedHealth Group Inc. (NYSE:UNH) are assailing new heights -- the latter of which is helping to offset the Dow's Boeing Co (NYSE:BA) losses.