We started yesterday with an exploration of stocks that have a tendency to reward traders irrespective of how the market trades. In today’s options alert, we will explore the options of CVS Health Corp (NYSE:CVS) as we continue the second day of trading options of stocks that are best-positioned to reward from the bearish or bullish bias.
CVS Health Corporation with a market capitalization of $94.01B is involved in the business of advising on prescriptions and helping manage chronic and specialty conditions. CVS Health includes the Company’s retail business, which is known as CVS/pharmacy; its pharmacy benefit management business, which is known as CVS/caremark; its walk-in medical clinics, CVS/minuteclinic; and its specialty pharmacy services, CVS/specialty.
Why We Are Looking at CVS Today
CVS has been surprising the market in recent times despite the general selloff that has been plaguing most of the market. As at 12:37PM EDT, shares of CVS Health Corp have gained 0.91% to trade around $80.85 per share after making an intra-day high of $81.19.
The chart below shows how shares of CVS have traded within the last one year. You will observe that the stock is already up 1.36% in the last 30 days and it has made 5 new highs in the last one month. The stock is up 13.09% in the year-to-date period and 35.87% in the last one year.
Technical Breakout or Breakdown
The chart above (with added annotations) shows how shares of CVS have predominantly traded northbound in the last one year. You will observe the trendline support that the shares of CVS have obtained at $65 in February, $75 in August and $80 earlier in October. You will also observe that the stock has experienced support twice at $83 in the middle of September and late last week.
From the foregoing, there exists a high probability that shares of CVS Corp will either rise to breakout above the resistance at $83 or breakdown below the support at $80. If the stock breaks out above $83, we can expect to see shares of CVS rising to new highs between $85 and $87. On the contrary, if the stock breaks down below $80, we can expect the drop to continue until the stock reaches the previous trendline support of $75 per share.
Fundamental Breakout or Breakdown
CVS health is one of the top performers in its class as its share price of $81 and market capitalization of $94B shows. By comparison, Walgreen has a market cap of $60B and Rite Aid has a market cap of $5B. It is also worthy of note that the company boasts a 23% market share and its purchase of Caremark assists in the generation of about $76B per year.
It might also interest you to know that CVS Healthcare Corp expects an 8.20% improvement in revenue this year and it is expected that revenue will grow by another 4.80% next year. Earnings estimate shows a 12.20% improvement this year, a 12.70% increase in earnings is expected next year. More so, it is expected that earnings will continue to grow by 14.22% for the next 5 years.
How to Trade CVS Options
The days of being overly bullish or bearish on a stock are a little on the horizon; hence, we will trade CVS with cautious optimism in the acknowledgement of the precarious market position. I recommend buying the CVS Feb 2015 80.000 put (CVS150220P00080000) at an asking price of $3.55 while balancing the trade with the CVS Feb 2015 80.000 call (CVS150220C00080000) at an asking price of $4.05.
— Daily Option Alerts