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Bulls Target CNO Financial at Highs

Bank Vault Door
James Porter | Brand X Pictures | Getty Images
Bank Vault Door

CNO Financial Group hit a four-year high yesterday, and the option action was just as hot.

Traders focused on the October 10 calls, which changed hands more than 2,800 times for $0.35 against open interest of 308 contracts, according to OptionMonster’s tracking programs. The name is rarely on our systems, so that volume really stood out.

Calls lock in the price in investors must pay to buy shares, so they can deliver some nice leverage in the event of a rally. But if the stock doesn’t move, those options will lose most or all of their value.

CNO Financial shares rose 0.5 percent yesterday to close at $10.05, trading at its highest level in about four years. The insurance company has been climbing after announcing a recapitalization plan that could boost earnings. FBR Capital Markets also wrote in a research note not long ago that “CNO is a compelling value play in our opinion with an in-progress capital management story.”

About 3,000 CNO calls traded yesterday versus just 125 puts, a reflection of the session's bullish sentiment. Total option volume was six times greater than average.

—By CNBC Contributor Pete Najarian

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Pete Najarian is a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money” and co-founder of OptionMonster.com. Najarian has no positions in CNO.

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