Options Bulls Bet on a Bounce for Cigna Stock, Despite Dip

Options bulls are speculating on a bounce for Cigna by the end of the week

Digital Content Manager
Aug 20, 2019 at 1:50 PM
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Healthcare concern Cigna Corp (NYSE:CI) is slightly lower today, down 0.5% to trade at $162.10 following a Reuters report that the firm plans on selling its group benefits insurance unit. The stock has been trending lower since a 9.2% surge in mid-July, with pressure from the 20-day moving average capping recent attempts to rally off the $160 region. 

CI Aug 20

Despite this negative price action, over 10 calls have been bought for every put during the last 10 days on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio is higher than nearly all other readings from the past year, indicating an unusually healthy appetite for bullish bets of late.

Options players have kept up this bullish momentum in the wake of today's dip, with 2,603 calls exchanging hands so far -- slightly higher than what's typically seen at this point. It looks like most of this action is surrounding the weekly 8/23 165-strike call, with a chunk of these positions being bought to open. This means traders are expecting the equity to rebound past the $165 region by the time this contract expires at the end of this week. 

Analysts have held out hope for the insurance issue too, with 16 calling CI a "buy" or better, compared to only two calling it a "hold," with not a single sell on the books. Plus, the consensus 12-month price target of $214.13 hasn't been touched since 2018. 

On the other hand, short interest has been on the rise. These pessimistic positions have surged 11.7% in the last reporting period to 5.96 million shares sold short -- a yearly high for CI. 

 

 

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