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Bullish Case: The HUM options volatility structure indicates increasing implied volatility, suggesting heightened market optimism. The ongoing growth in Medicare Advantage membership bolsters revenue potential, and improving investor sentiment may drive upward momentum.

Bearish Case: Despite a bullish trend, rising medical costs and regulatory pressures pose significant risks. Additionally, high implied volatility may deter risk-averse investors, leading to potential downward price corrections amid uncertainty.

Potential Outcomes:

1. Continued growth in Medicare Advantage memberships (60% probability).

2. Negative impacts from high medical costs (50% probability).

3. Regulatory scrutiny affecting profitability (40% probability).

4. Positive earnings report on November 1, 2023, driving price up (70% probability).

Trading Oracle: Implement a short put spread by selling 1 $305 put and buying 1 $300 put, targeting a 68% probability of profit, while capturing the premium from the current high implied volatility. The bullish sentiment aligns with notable upside potential as HUM stabilizes.

September 20, 2024