Assessing the Bearish Options Activity and Earnings Outlook in Humana (HUM): Is the Smart Money Signaling a Correction?

The healthcare sector's volatility has long attracted contrarian investors, but Humana Inc. (HUM) has emerged as a focal point for bearish positioning in Q4 2025. A surge in put options trading, coupled with earnings-driven valuation shifts, raises critical questions about whether institutional and retail investors are signaling a potential correction. By dissecting options activity and earnings dynamics, we uncover whether the "smart money" is hedging against downside risks or exploiting short-term dislocations.

Bearish Options Activity: A Contrarian Barometer

Options data paints a mixed but cautiously bearish picture for HUM. The volume put-call ratio stands at 1.6, indicating that puts have dominated call options in recent trading sessions. This metric, while not a standalone predictor, often reflects growing pessimism among traders. Meanwhile, the open interest put-call ratio of 0.61 suggests a more balanced but still bear-skewed landscape. Notably, 1,338 put contracts were traded, underscoring significant bearish liquidity.

Key strategies such as bear call spreads and put spreads dominate the options landscape. For instance, the February 2026 $255.00 put option, trading at a bid of $10.30, is out-of-the-money by 2% and carries a 59% probability of expiring worthless. Investors selling this put would effectively cap their cost basis at $244.70, a price level that implies a 5% decline from HUM's current valuation. Similarly, the $265.00 call option-used in covered call strategies-offers a 6.67% return if the stock is called away, but its 50% chance of expiring worthless suggests traders are hedging against near-term stagnation.

These strategies highlight a tactical bifurcation: while some investors are betting on a moderate pullback, others are securing income through premium capture, assuming limited directional movement. With 65 covered call opportunities available through January 2026, the latter approach appears increasingly popular.

Earnings-Driven Valuation Shifts: A Tale of Two Narratives

HUM's Q3 2025 earnings report, released on November 5, 2025, revealed a $3.24 adjusted EPS, surpassing analyst estimates of $2.66. On the surface, this appears bullish. However, the company revised its GAAP EPS guidance for 2025 downward from $13.77 to $12.26, signaling underlying financial strain. This revision, combined with a post-earnings drift of -0.8%, suggests that markets are discounting long-term risks despite short-term outperformance.

Valuation metrics exacerbate these concerns. Based on a trailing 12-month EPS of $13.03 and a P/E ratio of 21.93, HUM's FY 2025 earnings are projected to decline by 20.28% to $13.13 per share. Such a drop would not only erase recent gains but also challenge the stock's ability to justify its current multiple relative to healthcare peers. Analysts' muted price targets-though unavailable in recent data-historically reflect skepticism toward HUM's margin resilience in a high-interest-rate environment.

Correlating Options and Earnings: A Case for Caution

The interplay between options activity and earnings fundamentals reveals a compelling narrative. While HUM's Q3 beat temporarily buoyed sentiment, the bearish options data suggests that traders are pricing in a correction. The February 2026 $255 put, for example, aligns with the projected 20.28% earnings decline, implying that options markets anticipate a realignment of HUM's valuation with its GAAP performance.

Moreover, the prevalence of covered call strategies-offering returns of up to 7.20%-indicates that investors are prioritizing income generation over aggressive bullish bets. This behavior often surfaces when market participants expect sideways or declining prices but lack conviction in a sharp downturn. The annualized returns of 32.45% to 102.90% for these strategies further underscore the appeal of defensive positioning.

Conclusion: Is the Smart Money Signaling a Correction?

The convergence of bearish options flows and earnings-driven valuation shifts points to a potential inflection point for HUM. While the stock's short-term outperformance has attracted optimists, the options market's contrarian signals-particularly the emphasis on put spreads and covered calls-suggest that institutional and savvy retail investors are hedging against a medium-term correction.

For investors, the key takeaway lies in balancing HUM's earnings resilience with the growing bearish overhang. A decline to the $244–$255 range, as implied by active options strategies, could present a reentry opportunity for long-term holders. However, until the company stabilizes its GAAP guidance and demonstrates stronger post-earnings momentum, the smart money's caution appears warranted.