Options Traders Get Behind Anthem Stock Amid Healthcare Battle

Call buying is suddenly popular on health insurance stock Anthem (ANTM)

Mar 13, 2017 at 3:22 PM
facebook X logo linkedin

As the debate over Obamacare and the American Health Care Act wages on in Washington, a number of traders are using this time to place bullish bets on health insurance stock Anthem Inc (NYSE:ANTM). At last check, nearly 16,000 call options have traded, compared to fewer than 500 puts. The vast majority of the action has taken place at the weekly 4/7 170- and 175-strike calls, with data from the International Securities Exchange (ISE) confirming a number of bull call spreads at these strikes. More simply, options traders betting on an upside move for ANTM stock, though profits on these spreads will be capped at the $175 level. 

This type of options volume is unusual in a number of ways. For one, both total options volume and call volume have hit 52-week highs today. Plus, activity in ANTM's options pits has generally been put-heavy of late. For instance, the shares have a 10-day put/call volume ratio of 4.98 at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Not only does this ratio show nearly five puts have been purchased for every call, but it outranks 85% of all other readings from the past year. 

There's also been interesting activity taking place outside of ANTM's options arena. After months of decline, short interest on the health insurance stock surged by roughly 19% during the past two reporting periods. As it stands now, 8.4 million shares are sold short -- or 5.3 times the stock's average daily trading pace. 

On the charts, Anthem stock has been one of the big winners in the "Trump rally," surging nearly 32% since its Nov. 8 close. The shares were last seen trading at $167.29, as they continue to consolidate below their March 1 annual high of $169.20. In fact, ANTM is on pace for yet another finish above a closely watched moving average

Whether you think higher highs are ahead or Anthem Inc (NYSE:ANTM) is set to tumble, it's a great time to buy near-term options. The shares currently have a Schaeffer's Volatility Index (SVI) of 19%, which rests just 9 percentage points from an annual low. To put it differently, unusually low volatility expectations are being priced into short-term ANTM options. 

Stay in the loop with stocks on the move. Sign up now for Schaeffer's Midday Market Check.

Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!




Rainmaker Ads CGI