MHS – Medco Health Solutions Inc. – Near-term bearish options investors honed in on August contract puts this morning with shares of the healthcare company trading 3.95% lower on the day to trade at $47.34 as of 11:10 am ET. Medco’s shares fell as much as 5.2% earlier in the session to touch down at a new 52-week low of $46.70. Shares have declined more than 19.2% since July 15, 2010, when the stock traded at a high of $57.82, to reach today’s low point of $46.70. Investors expecting the price of the underlying shares to head lower ahead of expiration day next month purchased approximately 6,800 puts at the August $45 strike for an average premium of $0.75 per contract. Put buyers are positioned to make money should Medco’s shares fall another 6.5% from the current price of $47.34 to breach the effective breakeven point at $44.25 by expiration. The demand for put options on MHS helped lift the overall reading of options implied volatility on the stock 15.5% to 30.74% by 11:20 am 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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