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Friday, April 12, 2024

Coventry Call Buyers In The Black Following Aetna Deal


Today’s tickers: CVH, CS & WYNN

CVH – Coventry Health Care, Inc. – Options traders who purchased Coventry Health Care call options earlier this month are sitting on substantial paper profits this morning; shares in the managed care company rose 19% to a new four-year high of $41.70 on news Aetna is buying the company for $42.08 a share, in a deal valued at $7.3 billion. One winning trade initiated just before the weekend was the purchase of 220 of the Sept. $36 strike calls for a premium of $0.80 apiece. These contracts are now deep in-the-money and cost $5.80 each to purchase, or 7.25 times more than one trader paid on Friday afternoon. A larger bullish stake was established last Wednesday with the purchase of 2,650 of the Jan. 2013 $33 strike calls at a premium of $2.55 per contract. The asking price on the calls is currently up three-fold at $8.90 apiece as of 11:30 a.m. in New York. Finally, the purchase of some 1,650 calls at the Sept. $35 strike for an average premium of $0.53 each back on August 6th has generated big potential profits. Traders who picked up the $35 calls at $0.53 apiece could currently sell the calls for 11 times as much, or $6.30 per contract, as of 11:40 a.m. ET. Another winner from the deal is hedge fund, Greenlight Capital, Inc., which disclosed a 4.98% stake in Coventry and a long position in around 3.1 million shares in Aetna in the second quarter ended June 30th.

CS – Credit Suisse, Inc. – Traders are buying upside call options on Credit Suisse for a second consecutive trading session, positioning for shares in the Swiss bank to rebound. The stock has lost 40% of its value since March 19th, slipping around 1.5% this morning to $17.98. On Friday, buyers stepped in to pick up approximately 4,000 of the Sept. $18.97 strike calls for an average premium of $0.50 each and 1,000 of the Mar. 2013 $20.97 strike calls at an average premium of $1.25 per contract. Today, the action is once again in the Mar. $20.97 strike calls where 1,700 calls were picked up for an average premium of $1.19 apiece in the first 10 minutes of the trading session. Options traders long the Credit Suisse Mar. 2013 calls may profit at expiration in the event shares rally nearly 25% during the next seven months to expiration.

WYNN – Wynn Resorts, Ltd. – Shares in the casino resort operator got off to a strong start this morning, rallying as much as 5% to a three-month high of $110.00. The stock pared much of the earlier gains in the first half of the trading day to stand 1.35% higher on the day at $106.21 as of 12:10 p.m. in New York. Activity in the weekly options suggests some traders are positioning for shares in the name to extend gains in the near term. The Aug. 24 ’12 $110 and $115 strike calls each traded more than 2,000 times by midday. Trading is mixed, but buyers of the calls paid an average premium of $0.74 per contract this morning for the $110 strike call and $0.21 apiece for the $115 strike contracts. Traders may end the week with profits if shares in Wynn Resorts continue to move higher, while full loss of premium paid for the contracts may result if the calls are out-of-the-money at expiration. The stock has rallied more than 20% since touching down at a 52-week low of $90.11 at the end of July.


Caitlin Duffy

Equity Options Analyst

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