Obamacare Ruling Drives Healthcare Stocks Lower, Options Volume Higher

Options traders jumped on several healthcare stocks following a judge's Obamacare decision

May 13, 2016 at 12:26 PM
facebook twitter linkedin


A California judge on Thursday dealt a blow to President Barack Obama's signature healthcare law, "Obamacare," saying it was unconstitutional for the administration to reimburse health insurance companies without congressional approval. The decision had an immediate effect on a number of healthcare stocks, and options traders responded accordingly. 

Health insurance stock Humana Inc (NYSE:HUM) fell 2.5% on Thursday, and has followed this up by dropping another 2.3% today to trade at $162.06. The stock's now on pace for its lowest close since Feb. 12. Put options traded at twice their average volume on Thursday, and are doing the same today. This is par for the course, though, as HUM's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) comes in at 4.29 -- in the 84th annual percentile. 

Sector peer Anthem Inc (NYSE:ANTM) also gave back 2.5% on Thursday, and was last seen trading around $136 today. Thursday's put volume more than doubled call volume, but today, bears are taking a different approach. Specifically, traders are selling to open the weekly 7/1 141-strike call, betting ANTM will hold below $141 through the weekly options expiration at the close on Friday, July 1. Option bears have mobbed ANTM recently, putting its 10-day put/call volume ratio at the ISE, CBOE, and PHLX at an annual high of 12.81. 

Hospital operator Community Health Systems (NYSE:CYH) watched put volume run at two times the norm on Thursday, but there's been hardly any activity in the stock's options pits today -- even with the shares on the short-sale restricted (SSR) list for a second straight day. CYH plummeted almost 11% after yesterday's ruling, but is up 1.1% today at $12.70. 

Put volume on fellow healthcare stock HCA Holdings Inc (NYSE:HCA) ended at three times the average after the ruling , thanks to heavy buy-to-open activity at the June 72.50 strike. The stock was last seen just above breakeven at $77.85.

Finally, Tenet Healthcare Corp's (NYSE:THC) options volume stole the show yesterday, as over 51,000 puts traded, compared to fewer than 4,000 expected. Most of the action went down at the August 24 and 29 strikes, as a trader closed out a put ratio spread, according to Trade-Alert. THC was last seen slightly lower at $28.39, and continues to linger on the SSR list following yesterday's nearly 10% loss. 

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Winning With Weekly Options

1606854690

  


 
Special Offers from Schaeffer's Trading Partners