3 Ways To Trade UnitedHealth Group
Investing.com | Jul 04, 2022 09:02AM ET
- Shares of UnitedHealth are up around 3% since the beginning of 2022.
- It has grown through organic and acquisition growth
- Long-term investors could consider buying shares now
- iShares U.S. Healthcare Providers ETF (NYSE:IHF)
- Global X Dow 30 Covered Call ETF (NYSE:DJIA)
- Health Care Select Sector SPDR® Fund (NYSE:XLV)
- Global X Telemedicine & Digital Health ETF (NASDAQ:EDOC)
- Amplify CWP Enhanced Dividend Income ETF (NYSE:DIVO)
Shareholders in the Minnesota-based UnitedHealth Group (NYSE:UNH), which provides healthcare insurance and benefits services, have seen the value of their investment increase over 26% over the past 52 weeks.
By comparison, the Dow Jones Health Care Index and the Dow Jones Insurance Index are down 9.7% and 3.5% so far in 2022.
On Apr. 14, UNH shares went over $553, hitting a record high.
Recent metrics suggest UnitedHealth average fair value for UNH stock on InvestingPro stands at $629.41.
Source: InvestingPro
We can also look at UNH’s financial health as determined by ranking more than 100 factors against peers in the healthcare sector.
In terms of profit and price momentum, it scores 4 out of 5.
Despite the recent share price decline, UNH’s P/E, P/B, and P/S ratios are 27.8x, 7.14x, and 6.7x which is on the high side compared to peers which stand at 8.5x, 1.3x, and 0.7x.
We expect UNH to trade in a wide range and build a base between $490 and $520 in the coming weeks and then the shares could potentially start a new leg up.
Adding UNH Stock To Portfolios/h2
Bulls who are not concerned about short-term volatility could consider investing now or maybe buy an exchange-traded fund (ETF) that has UNH stock as a holding such as:
Or investors could consider setting up a bull call spread.
Most option strategies are not suitable for all retail investors. Therefore, the following discussion on UNH stock is offered for educational purposes and not as an actual strategy to be followed by the average retail investor.
Bull Call Spread On UnitedHealth Group Stock/h2
UNH Price At Time Of Writing: $517.40
In a bull call spread, a trader has a long call with a lower strike price and a short call with a higher strike price in UNH with the same expiration date.
In a bull call spread, both the potential profit and the potential loss levels are limited. The trade is established for a net cost (or net debit), which represents the maximum loss.
Today’s bull call spread trade involves buying the Sept. 16 expiry 520 strike call for $25.60 and selling the 530 strike call for $20.50.
Buying this call spread costs the investor around $5.10 or $510 per contract, which is also the maximum risk for this trade.
We should note that the trader could easily lose this amount if the position is held to expiry and both legs expire worthless, i.e., if the UNH stock price at expiration is below the strike price of the long call (or $520 in our example).
To calculate the maximum potential gain, we can subtract the premium paid from the spread between the two strikes, and multiply the result by 100. In other words: ($10.00 – $5.10) x 100 = $490.
The trader will realize this maximum profit if the UnitedHealth stock price is at or above the strike price of the short call (higher strike) at expiration (or $530 in our example).
Bottom Line
UNH stock has come under profit-taking pressure recently and the slide has improved the margin of safety for buy-and-hold investors. Alternatively, experienced traders could also set up an options trade to benefit from a potential run-up in the price.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.