$CVS Options Intelligence

🎯 SELL CVS FEB 20 80/75 PUT SPREAD

I recommend this credit spread because the term structure reveals a critical pricing inefficiency: the 7-day Clean IV at 37.6% sits significantly below the 39.5% baseline volatility, yet the near-term (2-day) IV is overpriced at 54.5%. This creates a calendar arbitrage opportunity. Combined with CVS's technical weakness (RSI at 44.17 showing neutral conditions, price 2.9% below the 20-day MA), the market has already digested yesterday's earnings beat. The $5.7 billion goodwill impairment and Medicare Advantage cost pressures are now priced in, reducing downside risk.

Sell CVS Feb 20 80/75 Put Spread
Stock Price: $75.45 | Entry: $0.85 credit

📊 Trade Metrics

• Risk: $415 (width of spread minus credit) | Reward: $85 (credit collected)
• Breakeven: $74.15
• Max Loss: $415 if CVS < $75 at Feb 20 expiry
• Max Profit: $85 if CVS > $80 at expiry
• Win Rate: 64% (based on delta spread)
• Days to Expiration: 9

📈 Term Structure & Volatility Analysis

• Baseline 90-day Vol: 39.5%
• 7-day Clean IV: 37.6% (2.1% below baseline = FAIR VALUE)
• 2-day Market IV: 54.5% (37% event premium from earnings = SELL signal)
• 12-day Clean IV: 33.3% (6.2% below baseline = strong BUY for longer-term)
• Calendar Opportunity: Massive 21% IV differential between 2-day (54.5%) and 12-day (33.3%) expiries
• Recommendation: Sell near-term premium (Feb 13/20), buy longer-term (Feb 27+) to exploit this collapse

The earnings event premium is collapsing as expected post-announcement. By selling the Feb 20 expiry (which still carries elevated IV from yesterday's announcement), you capture this decay while the Feb 27+ options are genuinely underpriced.

📈 Greeks & Volatility

• Net Delta: -0.36 (bearish bias, but contained)
• Theta: $12/day (accelerating time decay)
• Vega: -$18 (benefits from IV crush)
• Current IV: 37.6% (elevated vs 18.2% historical)
• IV Rank: 100% (Extreme - strong sell premium signal)
• Put/Call Ratio: 0.13 (extremely bullish - heavy call buying)

🎯 Why This Trade

Yesterday's earnings announcement—which included a record $402.1 billion full-year 2025 revenue but a $5.7 billion goodwill impairment charge—created an IV spike that's now reversing[1][4]. The market initially sold off 1.3% pre-market, but the stock has stabilized at $75.45. CVS reaffirmed its 2026 adjusted EPS guidance of $7.00-$7.20, beating Q4 consensus by 9.4%[4]. However, the Medicare Advantage cost pressures remain a structural headwind.

The technical picture supports a range-bound trade: RSI at 44.17 is neutral (not oversold), and price sits 2.9% below the 20-day MA at $77.73, suggesting support is holding. The 50-day MA at $78.43 provides resistance. This put spread profits if CVS stays above $75 through Feb 20—a realistic scenario given yesterday's capitulation already occurred.

The earnings multiplier of 2.88x (extremely high) means the market expected significant volatility, but that's now behind us. The Feb 20 expiry still carries residual event premium (37.6% IV), making it ideal for selling. By Feb 27, IV will likely compress to 33% or lower, so this near-term premium collection makes sense.

📊 Pro Analysis

• Current IV: 37.6% vs Historical: 18.2% (106% premium)
• IV Rank: 100% (Extreme - maximum sell premium opportunity)
• Expected Daily Move: ±1.65 (2.18%) - supports $75-$80 range
• Put/Call Ratio: 0.13 (Extremely bullish - puts are underdemanded)
• Market Maker Max Pain: $80 (59,375 contracts)
• Technical: RSI 44 (neutral), Price below 20MA by 2.9%, above 200MA (bullish)
• Unusual Activity: 2026-09-18 87.5 put showing 2.1x normal volume (longer-dated puts accumulating)

🔍 Earnings Date Check

✅ Earnings already occurred on February 10, 2026 (yesterday). This trade does NOT depend on capturing an earnings move—it profits from the post-earnings IV collapse. The Feb 20 expiry is AFTER the earnings announcement, so you're selling the residual premium that remains.

💡 Trade Management

• Entry: Sell at $0.85 credit (bid/ask spread assumed $0.80/$0.90)
• Target: Close at $0.40 (53% profit) by Feb 15-16 as IV compresses
• Stop: Exit if CVS breaks above $82 (invalidates thesis)
• Time Stop: Close 3 days before expiration (Feb 17)

📅 Economic Events: Non-Farm Payrolls Feb 28 (17 days out - minimal impact on this 9-day trade)

🔍 Market Overview

The broader market is digesting the January employment report released today, which could stabilize the labor market narrative and keep the Fed on hold[2]. CVS operates in healthcare, which is less rate-sensitive than growth sectors. The geopolitical uncertainty around Iran-Trump negotiations adds macro risk, but healthcare is a defensive sector. Sector peers: UNH (United Health), WMT (Walmart), AMZN (Amazon) all showing mixed momentum. CVS's dividen