Health Insurance Giant Reacts to Bernie Sanders' Slim Win

UNH options trading has picked up after Bernie won by less than expected

by Patrick Martin

Published on Feb 12, 2020 at 12:29 PM
Updated on Jun 24, 2020 at 10:16 AM

Yesterday, Senator Bernie Sanders won the New Hampshire democratic primary, but not in the blowout many expected. In the aftermath, J.P. Morgan Securities noted that for a candidate that supports the elimination of private insurance, the failure to secure a double-digit win is a boost for health insurer stocks. The brokerage firm pointed out that there's an inverse correlation between the candidate's rise and the performance of managed care stocks. One such example is insurance giant UnitedHealth Group Inc (NYSE:UNH), which is up 4.5% to trade at $303.08, the best Dow stock today.

UNH earlier hit a record high of $305, and reclaimed its year-to-date breakeven level. The stock has now added 28.6% in the last nine months, thanks in part to the shares' sharp pullback last month that was contained by their ascending 80-day moving average.

Options traders have shown a tilt toward puts lately. UNH's 10-day put/call volume ratio of 0.83 ranks in the 94th annual percentile at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). What this means is that while calls have outpaced puts on an absolute basis, the rate of put buying relative to call buying has been accelerated.

Echoing this is the stock's Schaeffer's open interest ratio (SOIR) of 1.31, which ranks in the highest percentile of its annual range. In other words, short-term options players have rarely been more call-heavy during the last 12 months. 

Today, traders are reacting to the Bernie news with calls. At last check, 24,000 calls have changed hands, triple the average intraday amount and nearly four times the number of puts traded. New positions are being opened at the weekly 2/14 305-strike call, with a slant toward sell-to-open activity. This indicates options traders see the $305 level as a ceiling for the end of the week, when the options expire.

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