MetLife Options (MET): Unusual Trading Activity
Options in mega insurer MetLife (MET) are experiencing a large amount of trading activity today.
MetLife is an interesting company right now…
Life insurance companies realize they must match the cheapest and best products currently on the market in order to generate sales. This leads to a cycle that pushes down industry returns.
Against this backdrop, it is extremely difficult for MetLife, or any life insurer, to generate sustainable excess returns.
So what makes MET so special?
MetLife tries to set itself apart by pursuing corporate customers in the mature US market. In fact, they provide insurance for 90% of the companies in the Fortune 100. This not only sets them apart, but allows the company to generate more revenue than their competitors.
At least, I believe this is what options traders are thinking.
How do I know this?
Simple… Just this morning a single trader came in and purchased 50,000 MET December $40 strike call options for an average price of $0.31 each.
This was obviously no small trade at $1,500,000.
And as a straight call option play, this option trader will see unlimited profits if MET continues its expansion into the corporate world.
However, that’s a pretty large guess, so what’s behind his thinking?
MetLife was formed into a public company in 2000. Today, MetLife is the largest life insurer in the US by total assets.
The US insurer provides a variety of insurance and financial services products through both captive and independent retail distribution channels.
Outside the US, MetLife operates in Japan and over 50 countries within Latin America, Asia-Pacific, Europe, and the Middle East.
But wait, there’s more…
In 2010, MetLife acquired ALICO. And this has strengthened the company’s Asia franchise while providing substantial growth opportunities in key emerging markets.
In addition, MetLife is the market leader in the group life insurance business. The company benefits from the sticky nature of corporate customers who don’t shop exclusively on price, but on customer service and value… this being one of MET’s strong suits.
Now, most importantly, MetLife will likely resume share buybacks or raise dividends as soon as the company is approved to de-register itself as a bank holding company. This action should happen by the end of 2012.
No question about it, MetLife offers customers a portfolio of solutions that can address the entire insurance stream for a long time into the future.
Call me crazy, but I think this option trader is onto something. Do you?
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Safe Trading,
Marcus Haber
Category: Unusual Options Trading Activity
