Tom Armistead

Health Insurers: Harnessing Volatility from Political Risk

Max Baucus somehow got CMS to investigate Humana over a letter they wrote to policyholders. CMS obediently went after them. Republicans cried foul.

I had a profit on the situation, did not want to take further interest in the game of political football with my investment as the ball, so I closed the whole position at a small profit.

Taking my ball and heading for home on this one.

Health Insurers: Harnessing Volatility from Political Risk

ari5000, I lean toward your belief that lobbyists etc. will serve to reduce the risk of anything too bad happening to the healthcare industry. I spent many years in the P&C Insurance industry, always a target for politics, and the companies by and large seemed to make money in spite of the politcal confrontations.

appro, I too dislike a stock market environment that responds so much to political considerations, rumors and manipulation. I have made my concerns known to my elected representatives. Of course they don't read or answer their mail, or just a form letter for a response, usually on another topic. So I play the investment game in the market as it is.

So if the public uproar makes healthcare stocks cheap and options on them expensive, I buy the shares and sell the options. Again, after appealing to congress or the SEC or state regulators, I go on from there to invest in the market as it is, not as it should be.

HMO Stocks Look Like Bargains

Prices for HUM relfect the recent CMS rate announcement for Medicare Advantage in 2010, only a .5% increase. But with 2009 guidance at 5.90-6.10 per share, and shares trading in the $24 area, I plan to buy some Monday.

Options implied volatility is very high, but should go down after CMS finalizes 2010 rates on 4/6. A covered strangle or straddle expiring in August looks good to me.