CVS – CVS Caremark Corp. – Shares of the pharmacy services company plummeted 12.35% to touch an intraday low of $29.62 on news Walgreen Co., the largest drugstore chain in the U.S., will no longer participate in new prescription-drug plans awarded to CVS’s pharmacy-benefit manager. CVS Caremark Corp.’s shares recovered significantly by midday but are still trading 5.5% lower on the day at $31.90 just before 12:15 pm (ET). Bearish options investors reacted to the news by selling near-term call options on the stock. Pessimistic players not expecting CVS Caremark’s shares to recover anytime soon shed 1,300 calls at the June $33 strike to take in an average premium of $0.26 apiece. Call selling continued at the lower June $32 strike where 1,500 contracts were sold at an average premium of $0.41 each. Investors keep the full premium received on the sale of the call options at both strikes so long as the price of the underlying stock fails to exceed $32/$33 through June expiration day. The overall reading of options implied volatility on CVS Caremark Corp. is up 20% to 34.81% as of 12:20 pm (ET).
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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