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Options Boil on UnitedHealth Merger Talk

Rumors that UnitedHealth Group is interested in the managed healthcare company Coventry Health Care have lifted Coventry as much as 10 percent Wednesday, while driving short-term options buying.

In the day's first hour alone, CVH traded 11,700 calls, most at the April 15 strike, where some 7,400 contracts changed hands. Normal call activity over the past 30 days has been 730 contracts.

At midsession, the Bethesda, Maryland-based Coventry's stock was trading around $13.10, well outside the money.

UNH, based in Minnetoka, Minn., boasts a market cap of $25.4 billion, substantially greater than Coventry's $1.9 billion — counting today's rally.

Last October, CVH lowered its earnings guidance and shares gapped lower to $18.29 from a previous close of $28.49.

Disclosure:

I have a position in Coventry Health Care.

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OptionMonster Trader School: Calls

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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.

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Disclaimer

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