Bullish Investor Takes Action Ahead of HIG Earnings

HIG – Hartford Financial Services Group, Inc. – One investor appears to be taking a bullish stance on the Connecticut-based insurance company ahead of the release of its second-quarter earnings report after the final bell this afternoon. HIG’s shares inched up 0.50% to $23.56 just before 1:25 pm ET. The firm’s shares currently stand 11% higher than the intraday low of $21.21 attained back on July 20. The implementation of a bullish risk reversal on HIG today suggests one trader expects share price appreciation to continue post earnings and ahead of August expiration. It looks like the options strategist sold 6,500 puts at the August $22 strike for an average premium of $0.45 each in order to buy the same number of calls at the higher August $25 strike for an average premium of $0.37 apiece. The transaction yields a net credit of $0.08 per contract to the investor, which he keeps as long as HIG’s shares exceed $22.00 through expiration day. Additional profits are available to the trader should the insurer’s shares surge 6.1% over the current price of $23.56 to exceed $25.00 by August expiration. Shares last traded above $25.00 on June 22, 2010.

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.

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