CVS Shares Sink After Walgreen Ends Relationship

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).

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

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.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.


*