NEW MARKET NEUTRAL STRANGLE PLAYS
(What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.)
Cigna Corp. - CI - close: 29.40 change: -0.50 stop: n/a
Why We Like It:
Congress is back in session and the debate about healthcare is about to heat up again. President Obama is due to address congress on Wednesday night and healthcare will be the primary topic. This is a fiery topic and the healthcare stocks are sure to be volatile. I'm suggesting we play a strangle on Cigna (CI) to take advantage of this issue. With a strangle we don't care what direction CI goes as long as it really moves.
I am suggesting the October options. I'm suggesting the October $35.00 calls (CI-JG) and the October $25.00 puts (CI-VE). Our estimated cost is $1.20. We want to sell if either option hits $2.50 or higher.
The closer we can open this trade to $30.00 the better.
BUY CALL OCT 35.00 CI-JG open interest=8781 current ask .50
BUY PUT OCT 25.00 CI-VE open interest=4864 current ask .70
Picked on September 08 at $ 29.40
Change since picked: + 0.00
Earnings Date 11/05/09 (unconfirmed)
Average Daily Volume = 3.8 million
Listed on September 08, 2009