Why This Dow Name is the Perfect Pick for Bulls

It looks like the perfect time to pick up premium on UNH

Jan 22, 2020 at 11:24 AM
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The shares of insurance giant UnitedHealth Group Inc (NYSE:UNH) appear to be setting up nicely for an upside move. The stock is carving out a bullish flag pattern, suggesting it's in good shape to add to its three-month rally of roughly 22%. Plus, there's currently familiar support in play from the 40-day moving average, which has been bullish for the shares in the past.

UNH stock jan 17

Making this trade even more attractive is the fact that UNH's implied volatility levels are relatively low right now, since we're just days from the company's earnings beat. By the numbers, the equity's 30-day at-the-money implied volatility of 18.5% ranks in just the 6th annual percentile. Not to mention, the security's Schaeffer's Volatility Scorecard (SVS) comes in at an elevated 95, showing a tendency to make bigger-than-expected moves.

What's more, UnitedHealth's Schaeffer's put/call open interest ratio (SOIR) of 0.89 ranks in the 94th annual percentile, and a steady rise in this reading has tended to coincide with technical strength from the stock in the past. Our recommended call has a leverage ratio of 12.7, and will double on a 7.4% increase in the underlying security.

Subscribers to Schaeffer's Weekend Trader options recommendation service received this UNH commentary on Sunday night, along with a detailed options trade recommendation -- including complete entry and exit parameters. Learn more about why Weekend Trader is one of our most popular options trading services.



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