UnitedHealth Trendline Bounce Draws Rare Batch of Options Bulls

UnitedHealth Group Inc is seeing an unusual uptick in call volume today

Mar 31, 2017 at 2:45 PM
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UnitedHealth Group Inc (NYSE:UNH) options traders are showing a rare affinity for calls today, with the contracts crossing at 1.2 times what's typically seen at this point in the day. At last check, roughly 2,900 UNH calls had changed hands, compared to 1,400 puts. Though UNH stock is trading down 0.6% at $164.05, the weekly 4/7 165-strike call is being bought to open. In other words, speculative players are betting on a bounce back above $165 by next Friday's close, when the weekly series expires.

More broadly, though, it's been put buyers who have been active in UNH's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 1.51 ranks in the elevated 71st annual percentile. Plus, there are currently 93,059 put contracts outstanding on UNH -- easily outpacing the 58,735 call options that are open.

Given UNH's impressive technical backdrop, it's likely some of the recent put buying, particularly at out-of-the-money strikes, is due to shareholders protecting paper profits against any downside. This is especially true as legislative uncertainty swirls around the insurance stock amid rumors that House Republicans may craft a new healthcare bill following last week's failed attempt at an Obamacare repeal. Nevertheless, UNH stock has surged more than 26% year-over-year, and hit a record high of $172.14 on March 16.

UNH stock daily price chart march 31

If past is precedent, more gains could be on the horizon for UnitedHealth Group Inc (NYSE:UNH), considering the shares just pulled back to a historically bullish trendline after notching this notable milestone. Specifically, UNH recently bounced from its 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, in the eight other times this signal has flashed in the past three years, UNH stock has gone on to gain 3.6% in the subsequent 21-day period, and has been positive three-quarters of the time.

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