NEW YORK Shares of Humana Inc (HUM.N) rose as much as 16 percent on Friday and its bullish options were active on talk that rival health insurer Aetna Inc (AET.N) was considering acquiring it, analysts said.
Shares of Humana were up $2.02, or 8.8 percent, to $25.08 in afternoon trade on the New York Stock Exchange, after rising as high as $26.75 earlier in the session.
"I don't know why they'd be up other than speculation that Aetna is talking to them in terms of a potential acquisition," Stifel Nicolaus analyst Thomas Carroll said. "It's purely rumor."
Shares of health insurers -- which have been beaten up amid concerns over U.S. healthcare reform -- were up broadly on Friday. Aetna shares were 4.2 percent higher.
A Humana spokesman was not immediately available for comment. An Aetna spokesman said it does not comment on rumors and speculation.
Humana's call option volume, which give buying rights to the company's shares, was explosive on Friday. In afternoon trade, about 58,000 calls traded, almost 10 times the norm, according to option analytics firm Trade Alert.
"This is a rumor that many think is feeding on itself. This is a slow day and option traders need something to talk about, especially in light of what has happened in that sector over the past few weeks," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago.
"The latest name I have heard is Aetna, although at this point everything seems to be wild speculation."
Humana is one of the largest private providers of Medicare health plans and its shares have been hit harder than other health insurers in recent weeks as the Obama administration called for lower Medicare payments. Medicare is the U.S. government health program for seniors.
A purchase of Humana would allow Aetna to dramatically expand its Medicare business.
Stifel's Carroll said that he would take it as a bearish sign about prospects for health insurers' Medicare business if Humana decided to sell at its current low valuation.
"My sense would be that Humana is not for sale," Carroll said.
The healthcare sector has been an active area for acquisitions lately, potentially stoking speculation.
"Several recent takeover announcements, such as Merck's (MRK.N) bid for Schering-Plough SGP.N, have perked up the interest of many investors who are looking for the next takeover candidate," said William Lefkowitz, options strategist at brokerage firms vFinance Investments in New York.
"And today, Humana's call options have been very actively traded as this company has been rumored to be a takeover candidate," he said.
(Reporting by Lewis Krauskopf and Doris Frankel in Chicago)