Option Investor
Newsletter

New Position - UNH

HAVING TROUBLE PRINTING?
Printer friendly version
UNH - UnitedHealth Group $93.29

UnitedHealth Group is an innovative leader in the health and well-being industry, serving approximately 55 million Americans. Through their family of companies, they contribute outstanding clinical insight with consumer-friendly services and advanced technology to help people achieve optimal health. The company's primary focus is on improving the American healthcare system by simplifying the administrative components of healthcare delivery, promoting evidence-based medicine as the standard for care and providing relevant, actionable data that physicians, healthcare providers, consumers, employers and other participants in healthcare can use to make better, more informed decisions.

With the major equity averages near multi-year highs, it was difficult to find any viable entry points in bullish issues. Despite the potential for additional upside activity, there were simply very few positions that met the strict criteria of the MCM Portfolio. However, we did uncover some spreads that offered reasonable risk versus reward if they could be entered with a slightly higher credit. UNH is one of those candidates and we believe the combination of share price volatility and liquidity in the (OTM) put options will allow traders to improve the profit potential in the suggested spread. While we generally don't recommend "legging" into a combination position, this is one case where that technique may be the only way to open the play with a viable premium. Traders who specify a "net-credit" for the spread should plan to leave the order in place for a few days to take advantage of any consolidation in the underlying stock.

Fundamentals: http://finance.yahoo.com/q/ks?s=UNH&quicken=2

Chart: http://stockcharts.com/def/servlet/SC.web?c=UNH,uu[l,a]daclyyay[pc50!c200][vc60][iut!Ub14!La12,26,9]&pref=G

PLAY (conservative - bullish/credit spread):

BUY PUT APR-80.00 UHB-PP OI=872 ASK=$0.35
SELL PUT APR-85.00 UHB-PQ OI=2231 BID=$0.60

INITIAL "NET-CREDIT" TARGET = $0.40-$0.45
POTENTIAL PROFIT (X 5 contracts) = $200
RETURN ON INVESTMENT (max) = 8%
COST BASIS = $84.60
LOSS-LIMIT/EXIT POINT = $86.25 (cons) - $84.75 (aggr)

Monthly Cash Machine Newsletter Archives