Unum Group Put Volume Spikes After Bruising Bear Note

One trader is betting the stock will remain atop the $30 region with short puts

Digital Content Manager
Jul 10, 2019 at 12:04 PM
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The shares of disability insurance concern Unum Group (NYSE:UNM) are slipping today, after Credit Suisse initiated coverage with an "underperform" rating and a $19 price target -- roughly half of last night's close. The analyst said the stock could face a rough patch based on a possible $5.7 billion after-tax reserve deficiency at net present value, which could spark investor concern. The stock brushed a two-week low of $32.72 earlier, and is now down 3.7% at $33.25, eyeing its worst day in months. 

Credit Suisse isn't the only analyst approaching UNM with caution. Prior to today, there were four "hold" or worse ratings on the table, and only two "strong buy" suggestions. The consensus 12-month target price, on the other hand, sits at $37.46, a 12.8% premium to current levels. 

Options traders are going wild as a result, with 2,715 puts across the tape so far, 246 times what's typically seen at this point. A huge chunk of this action lies at the September 30 put, where it looks like one trader is selling to open 2,700 of these contracts for a $0.47 each. This means the trader expects the underlying security to hold above the $30 region until the contract expires in September. Should UNM remain atop this area, the trader stands to pocket the initial credit collected of $126,900 (number of contracts * premium * 100 shares per contract). 

Looking at the charts, the last time Unum slipped below the $30 area was in December, when the shares plummeted to nearly three-year lows. The stock rallied hard off this bottom, but ran out of steam just below the $38 region. This area has acted as a ceiling for UNM several times since October. The stock's latest rally, though, was thwarted by its 100-day moving average. Despite this, the equity is still 13.1% higher year-to-date.

UNM Chart July 10

 

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