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US Supreme Court Ruling Key to Cigna Trade

AP

Someone is looking for a big move in Cigna.

The health insurer’s last earnings report missed estimates, but the company did raise full-year guidance. An even bigger catalyst is expected in June, when the U.S. Supreme Court will rule on the constitutionality of the Affordable Care Act.

A large trader bought 33,000 October 43 puts for $2.29 and 985,000 shares for $45.75 on Friday, according to OptionMonster’s tracking systems. Puts are bearish and shares are bullish, so owning both makes the investor directionally neutral.

The trader is looking for volatility to increase, which will drive up the value of the position overall. This means someone believes that the Cigna will move violently and/or volatility will continue to accelerate into the Supreme Court ruling.

Cigna shares fell 1.76 percent to $45.26 on Friday. The trade pushed total option volume in the name to more than 17 times its average amount.

—Najarian has no positions in CI.


Additional News: Cigna CEO Talks Earnings

Additional Views: 7 Health-Care Stocks to Weather Court Challenges

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

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