Centene Call Options Bring Big Gains for Subscribers

Breaking down a big winner from Schaeffer's Option Advisor newsletter

Managing Editor
May 31, 2018 at 3:43 PM
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Subscribers to Schaeffer's Option Advisor just scored a 100% profit with the Centene Corp (NYSE:CNC) June 100 call. We're going to take a look back to see why we were initially bullish, and how the options trade unfolded.

At the time of our recommendation in late March, we noted that healthcare concern CNC had been on a tear, tacking on 59% year-over-year. In mid-March, the shares broke out above a short-term trendline connecting lower highs just above the round $100 level.  We were anticipating that after about six weeks of poor price action, the stock was showing evidence of renewing its longer-term uptrend. Adding to this, the stock's year-to-date breakeven level also sat near the $100 mark, suggesting CNC's recent consolidation atop this price point could result in a sharp break higher from strong support. 

Shorts had also continued to pile on, though. More specifically, short interest had more than doubled since December 2016, and at CNC's average daily trading volume, it would have taken more than one week to fully buy back all of these bearish bets. These short sellers had been playing a losing game, however, and a short squeeze could have provided more tailwinds for the stock.

In our Option Advisor newsletter -- published Friday, March 23 -- we recommended that subscribers buy the June 100 call. The healthcare stock saw a healthy rise throughout the months of April and May, and eventually rallied to a record high of $117.42 on May 23. This impressive feat allowed us to close the trade and lock in a 100% profit.

 

Daily Chart of CNC with Entry and Exit Dates


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