Options: Call-Selling Suggests HMO Top

By Jud Pyle, CFA, chief investment strategist for the Options News Network

We saw call-selling across HMO stocks Humana(HUM Quote), UnitedHealth Group(UNH Quote) and Cigna(CI Quote) Wednesday, suggesting some investors see a cap, or ceiling, to the upside in HMO stocks as Republican representatives continue to express their side of the health care reform debate.

Looking at the HUM Nov. 32 calls, approximately 9,300 contracts crossed the tape yesterday. These calls, which closed down 20 cents, were home to open interest of 209 contracts heading into Wednesday's trading, suggesting yesterday's volume is very likely to translate as new positions. HUM shares closed up 6 cents to $28.34 yesterday.

Taking a look at the CI Oct. 25 calls, almost 15,000 contracts changed hands yesterday. The Oct. 25 calls were home to open interest of 22,000 yesterday, according to ONN.tv's Sidewinder report. A customer sold 3,500 Oct. 25 calls for $2.30 per contract in Wednesday morning trading, which means this trade will make money if these calls expire below $27.30 (the strike price plus the premium collected) come October expiration. CI shares closed up 30 cents to $21.84 last night.

More than 14,000 UNH Dec. 27 calls hit the tape Wednesday, the bulk of which were sold to open. These calls, which declined 30 cents on the day, were home to open interest of 5,711. The investor is betting that UNH shares will not climb much higher than $27 come December expiration. UNH shares closed at $24.02 on Wednesday, unchanged for the session.