As I was using my Power Stocks scanning program to take a look at the market, insurance stocks caught my attention. Several names in this area had all of the qualities I look for in a call option—the potential for a big move up (volatility) based on technicals and past activity in the stock, and good liquidity. All of these are names you’ll recognize, and for good reason—options which do not have liquidity may trap you into a position, or prevent you from taking a large enough position to make the transaction worthwhile.
I’ll leave it up to you to decide which strike price and month are appropriate for your trading style, but be sure to give yourself enough time to be right. I’ve also included the support and volatility levels my scanner has detected for these stocks. An average volatility is considered to be 20.
- Aetna (AET) closed Friday at $60.38, or 3% above its support at $58. The stock shows fairly average volatility at 25 so I wouldn’t expect any terribly wild moves.
- American International Group (AIG) is showing a reestablished buy pattern in which it has confirmed its upward trend after a temporary pullback. Such a bounceback is one of the most reliable buy signals. With the uptrend already starting (AIG is about $2 above its $42 support), make sure you either buy or try at-the-money calls to take advantage of additional upside.
- Cigna (CI) shows the same pattern of a reestablished buy, and similarly average volatility to the other insurance stocks. This is not a group known for its volatility. Currently trading at $67.90, CI is sitting right at its support, which could indicate a great entry price
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