Market Prices in Major Post-Earnings Swing for UnitedHealth Stock

Short-term traders have been quite call-skewed toward the Dow name

Managing Editor
Jul 16, 2018 at 3:06 PM
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Insurance concern UnitedHealth Group Inc (NYSE:UNH) is one of many Dow components preparing to report earnings, with the company scheduled to reveal its second-quarter results before the open tomorrow. UnitedHealth stock has been on a long-term uptrend, with recent pullbacks contained by the 30-week moving average. However, UNH was down 0.7% at $257.14, at last check.

Weekly Chart of UNH with 30MA

Digging into earnings history, UNH has closed higher the day after the company reported in all but one of the past eight quarters -- including the last five in a row. On average, the shares have swung 2.6% in the subsequent session over this two-year time frame, regardless of direction. This time around, the options market is pricing in almost double that, expecting a 5% move for Tuesday's trading.

Short-term traders are more call-skewed than usual toward the Dow stock, since UNH's Schaeffer's put/call open interest ratio (SOIR) of 0.53 ranks in the 2nd annual percentile. The July 260 call is home to peak call open interest of 5,952 contracts, but data from the major options exchanges points to heavy amounts of sell-to-open activity. As such, many have speculated that the security will hold below the $260 level through the coming weeks.

What's more, analyst attention has been very optimistic towards UnitedHealth stock, with all of the 16 brokerage firms following it sporting "buy" or "strong buy" ratings. Further, UNH's average 12-month price target of $280.33 sits at a nearly 9% premium to current levels.


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