UnitedHealth Group Inc (UNH) Options Trader Scores an $11 Million Profit

UnitedHealth Group Inc (UNH) put options are popping as the insurance stock takes a breather

Dec 19, 2016 at 3:47 PM
facebook twitter linkedin

Healthcare company UnitedHealth Group Inc (NYSE:UNH) has been racing up the charts in recent weeks, widening its year-to-date lead to more than 37%, and tapping a record high of $164 on Friday. The shares are off 1.6% at $161.38 today, but it may be that a breather was simply overdue, given that the stock's 14-day Relative Strength Index (RSI) had climbed into overbought territory by last week's close, at 73. Meanwhile, options traders seem to be shifting their preferences toward puts, including one speculator who appears to have just pocketed an incredible eight-figure profit.

According to Trade-Alert, UNH saw a block of 10,000 January 2017 150-strike calls sold to close this morning, for $13.15 apiece. It appears the trader had likely bought to open the positions on Nov. 7 -- when UNH was trading as low as $139.55 -- for an initial outlay of $1.73 each. Thus, the call trader's profit comes in at a jaw-dropping $11.4 million ($13.15 million premium received - $1.73 million initial premium paid). At the same time this trade was closed, however, it appears the trader bought to open a new block of 10,000 March 2017 155-strike puts for $4.25 per contract, or $4.25 million ($4.25 x 100 shares per contract x number of contracts), which are tied to 1.17 million UNH shares.

From a broader perspective, traders seem to be showing a growing affinity toward UNH puts in recent weeks. In fact, the stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) has popped to 1.44 from 0.86 over the last two weeks, and now ranks near the top third of all readings taken in the past year. Given the equity's recent outperformance on the charts, however, it's likely some of these put buyers were shareholders picking up puts as protection for their long stock positions.

Elsewhere, optimism toward UNH abounds. Out of 19 analysts following the stock, 18 rate it at least a "buy," compared to a single "strong sell" recommendation. Meanwhile, short interest dropped by more than 14% during the past two reporting periods, and now accounts for less than 1% of UnitedHealth Group Inc's (NYSE:UNH) total float.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Stop leaving money on the table with the same old broken options trading approach...

There is no options strategy that more perfectly capitalizes during earnings season better than this simple call and put buying strategy. Perfect for aggressive traders looking to recover their suffering portfolios so far in 2022. With the simplest possible options strategy, Schaeffer's team with 100+ years of options trading excellence, target 200% gains on every single trade. So many trades are being beaten down by the market, but don't be one of them! Don't waste another second... join us right now before the next trade is released! 

Schaeffer's Daily Bulletin Offer


Special Offers from Schaeffer's Trading Partners