To The Moon

$Centene(CNC)$ $UnitedHealth(UNH)$ $Humana(HUM)$ ✴️ PRELUDE ✴️✴️

I tracked this setup as it unfolded on 02Jul25, 🇳🇿NZ Time, and what I saw was a textbook case of structural breakdown, options foresight, and sector-wide repricing. The flow was undeniable. The chart? Devastating. The signal behind the noise? One of the smartest directional trades of the year. This post is for you, Mig! @Mig 

🚨💥🧠 Medicaid Meltdown: How Centene’s $1.8B Blowup Triggered the Smartest 1322% Trade of the Year 🧠💥🚨

📰 The Breaking Point: A Withdrawal Heard Across Healthcare

Centene ($CNC) dropped a bombshell after the bell on 01Jul25, pulling its full-year 2025 EPS guidance. The culprit: a $1.8B shortfall in risk-adjustment revenue linked to lower ACA exchange enrolments and a far costlier mix of sicker, higher-utilisation enrollees.

That was enough to ignite panic. Shares plunged nearly 30% in after-hours, then extended losses throughout 02Jul25, 🇳🇿NZ Time, to close down over 40%. From $56.65 to $33.76 in a single trading day, the kind of move that rewrites sector valuation models overnight.

📉 The Flow That Knew: Put Buyers Strike First

Several option plays positioned days, and in one case, mere hours before the news, were executed with uncanny precision. Here’s how they hit:

   •   $53P, Exp 18Jul25

• 1,000 contracts @ $1.14 on 25Jun25

• 1,000 contracts @ $1.35 on 26Jun25

• Cost basis: $1.25 average ($249K total)

• Max value on 02Jul25: $17.70

• Return: +1,322% in 5 trading sessions

• IV: Jumped from 30% to 87%

• Multi-leg flag: 81% tagged, but no offsetting spreads

   •   $56P, Exp 11Jul25

• 300 contracts @ $0.56 on 01Jul25, just hours before guidance was pulled

• Stock price: ~$57.38 at entry

• Max value by 02Jul25: $22.13

• Return: +3,850% in less than 24 hours

• OTM % at entry: -63%

• IV: Exploded from 27% to 136%

These weren’t hedges. No rolls, no spreads. Just aggressive directional intent right into earnings uncertainty. It worked.

🧨 The Trade That Blew Up: $60P Short Sellers

Not everyone saw it coming. On 27May25, 2,000 contracts of the $60P expiring 16Aug25 were sold naked for $5.05, banking $1.01M in premium. By 02Jul25, those contracts were bid $25.20, marking a 399% paper loss. Selling premium into a structurally mispriced sector was a costly mistake.

📊 Fundamental Breakdown: Medicaid and ACA Misfire

Centene’s business model depends heavily on Medicaid and ACA marketplaces. But the post-COVID enrolment churn is now pushing high-cost patients from state programs into exchanges. The result: a sicker pool, higher utilisation, and premiums that aren’t keeping up.

Centene flagged sharp cost escalations in behavioural health and specialty drug usage, particularly in Florida and New York, compounding the issue. Internal data from 22 states confirmed their fears. Risk-adjustment revenue expectations collapsed. EPS guidance was obliterated.

💬 Wall Street’s Take

“This is more than just bad modelling, it’s a macro-level warning about the viability of ACA pricing,” said Jared Holz, healthcare strategist at Mizuho, in a 02Jul25 client note. “We may be underestimating how underpriced 2025 plans really are.”

📉 The Tape Confirms It: Technical Destruction

CNC gapped from $56.65 to open at $37.34, printing a 52-week low at $33.76 by midday. The chart sliced through every moving average, including the weekly 200 EMA, and obliterated multi-month support.

• RSI: Broke its Oct 2023 trendline

• OBV: Dumped to multi-year lows

• Volume: 93.6M shares traded, 15× daily average

• Post-market flow: 1.24M shares, confirming institutional exit

🏥 Sector-Wide Collateral Damage

The panic spread to peers with ACA and Medicaid exposure:

• $HUM -7.2%

• $UNH -4.8%

• $ELV -5.4%

• $MOH -9.9%

The message was clear. The ACA pricing model across managed care may be fundamentally broken.

📉 Valuation Compression and Model Breakdown

CNC’s valuation cratered:

• Forward P/E collapsed to ~7× from ~12×

• P/S now 0.11×, P/B 0.60×, lowest in over a decade

• EPS outlook slashed by $2.75, new base case EPS ~ $4.50

With no forward guidance, forecasting future cash flows becomes guesswork. Valuation metrics lose their meaning when the earnings base itself is unstable.

📆 Timeline Recap

• 25–26Jun25: Smart flow enters $53P strikes

• 01Jul25 (PM EDT) / 02Jul25 🇳🇿NZ Time: CNC pulls full-year guidance, cites $1.8B risk-adjustment gap

• 02Jul25: Shares crater 40%+, sector selloff spreads

• 25Jul25: Q2 earnings call becomes critical inflection point

📍 Current Market Stats (Tiger Data)

• Turnover Rate: 19.91%

• Market Cap: $16.81B

• Float Cap: $15.87B

• 52-Week High: $80.59

• 52-Week Low: $33.76 (just set)

• P/E (TTM): 5.03

• Forward P/E: 4.70

📈 Forward Outlook Scenarios (90-Day Window)

• Bull Case (35%): Regulators approve steep 2026 rate hikes, CNC recovers to $45–48

• Base Case (45%): Sentiment remains fragile, rangebound $30–38

• Bear Case (20%): ACA risk pool deteriorates further, stock slides to $26

🔎 What I’m Tracking Now

• Full ACA data from remaining 7 states

• Florida and Texas 2026 rate filing approvals

• Q2 earnings commentary on Medicaid renegotiations

• September IV skew and flow trends

• Unusual Whales sweep aggression on longer-dated puts

📢 Conclusion: A Healthcare Inflection Point, Not Just a Dip

Centene didn’t just miss guidance. It detonated its own credibility. The scale of the revision, the speed of the crash, and the clarity of the options flow all point to a deeper fracture within the ACA and Medicaid insurer model.

This wasn’t about weak Q2 numbers. It’s about structural risk mispricing across the entire managed care vertical. The patients are sicker, the costs are higher, and the premiums were set on outdated assumptions. The market is now demanding a full recalibration, and it may not stop with $CNC.

There’s a recovery path, but it’s paved with regulatory approvals, actuarial resets, and investor trust that won’t return overnight. Until those signals emerge, I’m treating this as a volatility vehicle, not a value play.

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Trade like a boss! Happy trading ahead, Cheers, BC 📈🚀🍀🍀🍀

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