Big Bull Bet on This Insurer's Shares
CNO Financial has leveled off after a nice rally this month, but one bull believes that more gains are on the horizon for the insurance company.
OptionMonster's tracking systems detected the purchase of about 4,000 June 7 calls for $0.75 against open interest of just 170 contracts. The trade pushed total option volume in the name to 16 times greater than average.
CNO stock rose 1.93 percent to $6.87 yesterday and is up 20 percent in the last three months. It has enjoyed strong earnings growth and trades at lower valuations than most peers, making it the target of sporadic call buying.
The stock broke an intermediate downtrend last month, consolidated above its 200-day moving average (purple line on chart) and then proceeded to rally toward the $6.85 area that has been resistance since October 2009. Some chart watchers may interpret the price action as evidence that CNO is still moving in a larger uptrend.
If the stock breaks current levels, the next likely area of resistance is around $8.10 to $8.70, its range in August and September of 2008 before the stock market crashed.
Yesterday's call buyer needs the stock to climb at least 13 percent to $7.75 in the next six months for the trade to turn a profit.
Overall in the session, calls outnumbered puts by a bullish 29-to-1 ratio.
Disclosures:
Russell does not hold significant numbers of shares in CNO Financial.
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Other Insurance Firms Now:
AIG
Aegon
MetLife
Prudential Financial
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Options Trading School:
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David Russell is a reporter and writer for OptionMonster.
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