Why trader is selling puts in WellCare

optionMONSTER

WellCare Health Plans has been pulling back since reporting earnings last week, but one trader apparently believes that any further losses will be limited.

optionMONSTER's tracking systems detected the sale of 2,000 September 50 puts in one print for $2.15. This is clearly a new position, as the open interest in the strike was a mere 57 contracts before the trade appeared.

The put seller is looking for WCG to stay above the $50 strike price through expiration in mid-September. The trader will face the obligation to buy shares if they fall below that level, though the effective price would be $47.85 once the $2.15 credit from the put sale is included. (See our Education section)

WCG lost 1.54 percent yesterday to close at $56.38, having faced resistance at its 50-day moving average for the last three weeks. The health-care provider beat revenue forecasts and raised guidance in its first-quarter report on Friday, but earnings missed esimates.

Total option volume in the name was more than 8 times its daily average for the last month.

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