MarketMoodz
Trader Sells CI July 280 Put to Harvest Income
Amid a market-wide volatility surge, a trader on CNBC's Options Action is selling the July 280 put on Cigna (CI) to generate income and potentially buy the stock at a discount. The move targets CI's cash flow profile — about $30.35 in forward EPS, a forward P/E of ~9.5x, and a $6 billion buyback program — as a counterbalance to market drama.
Key Takeaways
- Trader proposes selling the July 280 put on Cigna (CI) with an option premium near $6 per share.
- CI is trading around $290, with forward EPS of about $30.35 and a forward P/E near 9.5x.
- Cigna has a $6 billion buyback program (≈ $2.5 billion remaining) and a ~2.2% dividend that goes ex-dividend on 9/4.
- At a $6 premium the breakeven is $274 per share; the $6 premium equals about $600 per standard options contract and reported $60/$276 figures in the article appear inconsistent with standard option math.
People Involved
- No specific individuals mentioned
Entities Involved
- Cigna (CI)Managed-care company; target of the put-selling trade and source of dividend and buyback support
- CNBC — Options ActionTV show where the trader presented the trade idea
MarketMoodz Analysis
Selling the July 280 put on CI is a classic income-focused, volatility-selling play: collect premium now and either keep it or be assigned stock at an effective cost basis of $274 per share (strike minus premium). That premium represents roughly 2.1% of the $280 strike; annualized yield depends on time to expiration and how often the strategy is repeated — the trader projects mid-teens annualized returns if the approach is executed and rolled consistently. Remember that margin/capital is effectively committed as if buying the stock, and downside remains material if the stock falls sharply.
The trade rests on fundamentals that look supportive on paper: CI trading around $290, forward EPS near $30.35 (forward P/E ≈ 9.5x), an active buyback program (about $6 billion total; ~$2.5 billion left) and a ~2.2% dividend with an ex-dividend date of 9/4. Income traders like selling puts into short-term volatility spikes where implied volatility premiums widen; the idea is to harvest elevated premiums and either walk away with the cash or own a steady, cash-generating business at a lower net price.
A key caveat: the CNBC report's option math contains inconsistencies — the $6 premium is $600 per contract, not $60, and the correct breakeven is $274 per share; maximum loss per share if CI goes to zero would be $274 (or $27,400 per contract). Also, these details were drawn from the CNBC segment and could not be independently verified here; option prices, dividends and buyback figures are time-sensitive. Investors should confirm current quotes, check assignment and margin mechanics with their broker, and weigh healthcare-specific risks (medical-cost trends, regulatory headlines) before replicating the trade.
Source: Original Article