The entire group of health insurers rallied on Monday based on favorable outcome of MA Senate elections. Leaving all the political bickering aside, purely from a technical standpoint I think the stock is a bit overextended here and a pull back towards $30 is reasonable. There is heavy support at $30 which should hold. Long-term weekly chart is attached. I like the following calendar spr
ead: - Buy to open Mar $32 puts
- Sell to open Feb $32 puts
The trade can be done for a debit of $0.30 as of Monday's closing prices and provides nearly 3-to-1 return if the stock drifts lower to $32 by Feb expiration. In case the upward momentum continues, I would exit the trade if the stock breaks $38, which is current resistance, on greater than daily average volume.
