Progressive is the $17B company that is known for auto, motorcycle, commercial truck, and property-casualty insurance, and of course Flo from the commercials. Following the mega $28B acquisition of Chubb by ACE Corp just a few weeks ago, it sent other P&C insurers higher (including PGR) as investors reassessed industry valuations and who might be next to get bought out.

PGR trades at a P/E ratio of 15.47x (2015 estimates), price to sales ratio of 0.89x, and a price to book ratio of 2.43x. They are consistently growing revenue in the high single digit range annually (topping the $20B mark this year). Today, Citigroup raised their price target to $34 from $32.

Unusual Options Activity

On July 15th, 10,000 Feb 2016 $30 calls were bought for $1.45. Call activity was 19x the average daily volume (total call open interest at the time was just 21,439 contracts). Over 11,000 remain in open interest in the Nov $27 calls from buying on June 10th.

Technical Analysis

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Shares of PGR are up for the 5th straight trading session and are up over $2 from the July lows. Now is not the time to step in and start a large bullish position, but don’t let this one slip by. I’d look to start building a position in the stock when it pulls back to the $28-$29 level. Given that Q2 earnings are due out on July 17th, this could be a “buy the rumor, sell the news” type event with shares baking quite a strong report. Watch for a quick 2-4% drop and consider buying the Feb 2016 $30 calls even cheaper than what the big trader paid.

To read Mitchell’s “Unusual Options Activity Report Featuring Call Buying In Bank of America” on OptionsRiskManagement.com, please click here.