Healthcare plan provider Centene Corporation (CNC) has been trending lower over the past year, with shares down over 20%. One trader sees a further decline into the start of 2025.
That’s based on the February 2025 $55 puts. With 65 days until expiration, 7,325 contracts traded compared to a prior open interest of 151, for a 49-fold rise in volume on the trade. The buyer of the puts paid $1.80 to make the bearish bet.
Centene shares recently traded for about $59.50, so shares would need to decline by about $4.50, or about 7.6%, for the option to move in-the-money. It would also mean shares retesting their 52-week low of $55.03.
While Centene has been out of favor with the market, the company has had a strong year. Revenues are up by 6%, but total earnings have jumped by 52%. And with shares trading at about 8 times forward earnings and just 0.2 times their price-to-sales, Centene looks like a value play here.
Action to take: Shares look like a value, but have yet to show signs of the stock price bottoming out. Investors should hold off until that happens, and expect a retest of the recent low first. At present, Centene does not pay a dividend, so investors won’t even get paid to wait for a turnaround.
For traders, the February 2025 $55 puts look well positioned for an attempt to re-test the 52-week low. Traders should take quick profits when that happens rather than try and hold until expiration.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.