Best Stock on the Market

Put Spread on WCG on 1/16/2013

Broken Support on WCGWellCare Health Plans (WCG) provides managed care services for government-sponsored health care programs in the United States.

The company offers Medicaid plans, including plans for beneficiaries of Temporary Assistance for Needy Families (TANF) programs; Supplemental Security Income (SSI) programs; and ABD programs and state-based programs, such as Children’s Health Insurance Programs (CHIP) and Family Health Plus (FHP) programs for qualifying families who are not eligible for Medicaid. The TANF program provides assistance to low-income families with children; and ABD and SSI programs provide assistance to low-income aged, blind, or disabled individuals. It also provides Medicare, a federal health insurance program; Medicare Advantage, a Medicare’s managed care alternative to original Medicare that provides individuals standard Medicare benefits directly through Centers for Medicare & Medicaid Services; and coordinated care plans, which are administered through health maintenance organizations and require members to seek health care services and select a primary care physician from a network of health care providers.

Shares have dropped below a one year support of $46 and lower prices are expected for this stock. The issue is suffering from lack of clarity for the programs that it adminsters. Investors are bailing out of the stock on the fear that some of the program that the company is adminstriting will be cut by the upcoming budget negotiations. 

52-week Trading range:  $45.29 - $74.41

Last Trade:  $45.45

Here is the trade:

Buy one February $45 Put option at $2.30

Sell one February $40 Put option at $1.20

Net Investment: $1.10

Maximum Loss: $1.10 if stock closes above $45 by February Expiration

Maximum Profit: $3.90 if stock closes at $40 by February expiration.

Trade

  • Buy 1 February $45.00 Put at $2.30
  • Sell 1 March $40.00 Put at $1.20
  • For a net debit of $1.10

Profit/Loss Analysis

  • Breakeven at $43.90
  • Maximum profit is $390.00 at strike of $40.00
  • Maximum loss is ($110.00) at strike of $45.00

Closing Summary

  • Sold 1 February $45.00 Put at $0.05
  • Bought 1 March $40.00 Put at $0.00

Position closed on 2/13/2013 at price of $0.05 with a -95.45% loss in 28 days.

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