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How one bear is targeting Humana

David Russell (david.russell@optionmonster.com)

Humana got crushed earlier this week, and the tone is still negative.

optionMONSTER's Depth Charge tracking program detected the purchase of 3,100 April 72.50 puts for $3 and the sale of an equal number of March 80 puts for $6.74. Volume was below open interest in the March contracts, indicating that an existing position was closed and rolled to the lower strike.

The investor collected a credit of $3.74 and has an additional month of downside exposure to the Louisville-based health insurer. He or she may be hedging a long position or may be simply using the puts in lieu of shorting the stock. (See our Education section)

HUM is up 0.28 percent to $72.81 in morning trading but has lost 10 percent in the last week. Most of that drop occurred on Tuesday after the company said preliminary Medicare rates announced by the government would hurt its business. Shares have also been fighting against a declining 200-day moving average, so if they drop from here it could be viewed as a confirmation of the bearish downtrend.

Total option volume is twice the daily average so far today, according to the Depth Charge, with puts outnumbering calls by a bearish 20-to-1 ratio.

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