Humana, Inc. Call Credit Spread (NYSE:HUM)
TheOptionPlayer.com sets up a Humana, Inc. (HUM) short-term (8-day) option strategy. Investors could simultaneously:
Sell the May week-five expiration HUM $126 call for $.55 (yesterday's closing bid/ask mean)
Buy the $130 call at $.125 (yesterday's bid/ask mean)
The difference between funds received and paid out is a $.425 per share credit which we keep if Humana, Inc. stock closes below $126 on Friday May 30th, but immediately exit the position if it appears the price will end up higher. Another suggestion is if the price gaps up open the trade using higher strike prices. See Guidelines page at www.theoptionplayer.com/ for explanation on how trade is set up.
Why we recommend it:
This is basically a technical play on Humana, Inc. (NYSE: HUM). Observe in the daily chart below how a few weeks ago Humana shares surged to a 52-week high after its earnings announcement, capping a 13% move over four weeks. The stock is taking a breather as investors cashed in gains and the recent high became resistance. We noted how Humana stock price usually pulls back from being overbought and momentum is waning. We are betting Humana stock will remain below the target for another week based on recent price behavior and trading is typically very light during the week of the Memorial day holiday.
52-Week High: $123.94
52-Week Low: $77.98
Average Volume (3 month): 1,655,570