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Hawk’s Nest

Put Sellers Mark Bottom in Managed Care Leader Before 35% Stock Run

by | Nov 11, 2022

As we have covered often at OptionsHawk large opening put sales have very strong signal rates particularly when seen in high quality names. We highlighted a major one back on 6/21 that was perfectly timed in CIGNA (CI) when shares were near $240 an recently hit $325. The trader kept the $6M in premium while January risk reversals are up massively.

CIGNA (CI) on 6/21 with large put sales to open with 4000 of the $230 strike and 3000 of the $220 strike in October expiration collecting ~ $6M in premium. CI also saw January $280/$210 bull risk reversals open 2000X back in March/April and some opening sales set in September put strikes now OTM. CI a relative strength name in 2022 with shares +6.5% and in a strong uptrend with 8/21-week EMA in a bull signal. Shares have dipped 5% the past month retesting the March flag breakout and based nicely on 1-year VPOC last week before starting this week with a base breakout. Cigna is a global health services company consisting of our U.S. Commercial, U.S. Government and International Health operating segments that offers a differentiated set of pharmacy, medical, behavioral, dental and supplemental products and services, primarily through two brands: Cigna and Evernorth. CI has a market cap of $79B and trades 9.7X Earnings, 1.7X Book, 14X FCF and with a 1.83% dividend yield. The company also has a significant cash position which they said recently they plan to deploy through buybacks and capital return and recently announced a $3.5B accelerated buyback. CI sees opportunity for their PBM business with growth in biosimilars, especially Humira in 2023 and sees a $100B market opportunity. CI held an Analyst Day earlier this month and outlined the growth opportunity for Evernorth. Management discussed Evernorth and Accredo specialty businesses as key to the company’s long term growth and also unveiled opportunities to expand CuraScript, Evernorth’s under the radar specialty distribution business. The vertically integrated heath plans (UNH, CVS, CI) will be better positioned over the long term to gain share and member stickiness. Analysts have an average target of $295 with short interest low at 1% of the float. BAML upgraded to Neutral with a $300 target on 5/23 on a stronger growth outlook for commercial and PBM. “