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

Shares of Cigna ( CI) are up more than 2% so far today to $21.30. The company is set to announce earnings before the market opens on Thursday, April 30, and at least one investor is bullish, expecting a potential bump in the stock. This investor has been active today at the May 25 call strike.

Looking at these back-month options, we find that more than 10,000 had traded in the first hour of trading this morning. Open interest in these calls was just 2,607, according to the Sidewinder report at www.ONN.tv.

As the day has worn on, the volume in the calls is now up to nearly 18,000. What is most noteworthy about this volume is that most of the activity is on the buy side, meaning there are more buyers of these calls than sellers.

As we mentioned, this buying activity could be a bet by an investor that shares of CI will continue to run if the earnings announcement has positive data. Another thing that could be driving the call buying is continued speculation that Aetna ( AET) might be interested in buying CI. There are various unconfirmed rumors circulating that AET might be interested in paying as much as $32 per share for CI.

The May 25 call options traded this morning for around 70 cents, with the stock near $21.20. At that price, the buyer needs the stock to be above $25.50 to be in the money at expiration, another 20% rally on top of the stock's 64% move since its closing low on March 5 of $12.87. CI has not traded above $25 since October.

Call-buying like this does not mean investors should run out and buy shares. But it is worth noting that there are potentially two catalysts to make the stock jump: a potential takeover or a positive earnings announcement.

Jud Pyle is the chief investment strategist for Options News Network (www.ONN.tv) and the portfolio manager of TheStreet.com Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for TheStreet.com.
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."