Coventry Health Care (CVH - option chain) shares are rising Tuesday after the company reported a fourth-quarter profit of $109.08 million, or 74 cents per share, on revenue of $3.42 billion. Analysts had forecast a profit of 56 cents per share on revenue of $3.49 billion. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CVH.

CVH opened this morning at $23.81. So far today the stock has hit a low of $22.83 and a high of $23.99. As of 11:40, CVH is trading at $23.22 up 78 cents (3.5%). The chart for CVH looks bullish bullish and S&P gives CVH a positive 4 STARS (out of 5) buy ranking.

Coventry Health Care (NYSE: CVH - option chain) stock is falling today after the company forecast 2009 adjusted earnings of $2.00 per share, below analysts' estimates of $2.28 per share. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CVH.

This morning, CVH opened at $10.07. So far today the stock has hit a low of $10.78 and a high of $11.74. As of 12:10, CVH is trading at $11.36, down $0.68 (-5.7%). The chart for CVH looks neutral and S&P gives CVH a 3 STARS (out of 5) hold ranking.

For a bearish hedged play on this stock, I would consider an April bear-call credit spread above the $15 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 11.1% return in three months as long as CVH is below $15 at April expiration. Coventry would have to rise by more than 31% before we would start to lose money. Learn more about this type of trade here.

CVH hasn't been above $15 by more than a few cents since October and shown resistance around $14 recently.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CVH.

Sellers took control at the open and sent the market lower. The Dow Jones Industrial Average got with striking distance of the August 1st low -- down 200 points -- before rebounding to close down only 31 points.

The NYSE had volume of 4.3 billion shares with 1,279 shares advancing while 2,058 declined for a loss of 14.27 points to close at 9,435.04. On the NASDAQ, 3.2 billion shares traded, 1,309 advanced and 1,792 declined for a loss of 11.6 to 2,544.89.

Eaton Corporation (NYSE: ETN) rose $6.98 (8%) to $93.45. Las Vegas Sands Corp. (NYSE: LVS) fell $7.68 (-7%) to $100.47. Coventry Health Care, Inc. (NYSE: CVH) strengthened $3.26 (6%) to $54.38. Whole Foods Market, Inc. (NASDAQ: WFMI) fell $2.58 (-6%) to $42.27. Darden Restaurants, Inc. (NYSE: DRI) rose $2.15 (5%) to $42.94.

With the market plunging on the open, the options were active. There were 8.8 million puts and 8.3 million calls traded for a put/call open interest ratio of 1.07. Garmin Ltd. (NASDAQ: GRMN) saw heavy volume on the August 45 calls (GQRHI) with over 259,000 options trading. The August 75.0 Garmin calls (GQRHO) moved 121,000 options. Most of this option volume is dividend arbitration in anticipation of the 0.75 cent dividend Monday.

Apple Computer, Inc. (NASDAQ: AAPL) saw heavy volume on the August 130 calls (APVHF) with over 55,000 options trading. Financial Sector SPDR ETF (NYSE: XLF) saw heavy volume on the September 34 puts (XLFUH) with over 234,000 options trading. The other strikes were active as well and they investors were likely trying to protect investments capital. PowerShares QQQ Trust ETF (NASDAQ: QQQQ) saw heavy volume on the September 45 puts (QQQUS) moving 171,000. Put index options can work as an insurance policy against market falls.

Kevin Kersten is an Options Analyst with InvestorsObserver.com. Disclosure note: Mr. Kersten owns and or controls a diversified portfolio of long and short positions that may include holdings in companies he writes about.

Coventry Health Care's (NYSE: CVH) earnings report from late April won't make anybody ill. Operaring revenues were up 15.4% to $2.24 billion. Net earnings were $127.5 million and diluted EPS were $.80, excluding a $.04 per share debt refinancing charge. Coventry is growing both organically and by acquisition. It purchased Concentra worker's compensation business unit in order to gain a national market, and has announced plans to acquire selected assets of Mutual of Omaha's health insurance business in the near future. In order to finance these acquisitions, Coventry Health Care retired $170.5 million in debt at 8.125 % to refinance $400 million of debt at 5.95%. The company also bought back 4 million of its own shares for $221 million.

According to CEO Dale Wolf, the company is doing exactly what it promised shareholders it would do: acquire strategic assets, buy back its own stock, refinance debt to more favorable terms, and launch new products and/or policies. One policy that Coventry has been pursuing is to raise premium yields on its members. Current Coventry members yield $271.03 in premiums per month, an increase of 5.6%. But expenses increased 4.8% to $212.43 during that same period, thereby negating most of the increase in premiums.

Coventry forecasts 2Q 2007 revenues of $2.3-$2.4 billion, yielding diluted EPS of $.94-$.96. FY 2007 total revenues are forecast at $8.1-$8.4 billion, yielding diluted EPS of $3.92-$3.98 icluding $.04 per share debt refinancing charges. The stiock opened the year at $49.81, and closed recently at $59.63, a respectable 20% run-up in share price. But health care costs have become a hot topic in Democratic presidential debates recently, and insurance companies have been held responsible for runaway costs and substandard treatment complaints. At half the size of health insurance giant Aetna (NYSE: AET), Coventry is a slightly better deal in terms of its p/e multiple, but there are more attractive investments out there than either one of these.