The Implied Volatility of this Call options was very high at 59.0 which is explained by the recent precipitous decline in the stock price caused by the uncertainty related to its recent news related to its Medicare Advantage medical loss ratio deterioration as well as Federal government inquiries. Based on the recent insider purchases by several top management executives at UNH, my belief is that the price decline is overdone. So, I decided to establish a short-term moderately in-the-money strike price with a 66.2% probability that the stock will be in-the-money on its 6/6/2025 expiration date.
As detailed below, a potential return-on-investment result is +2.5% absolute return-on-investment (equivalent to +64.1% annualized
return-on-investment for the next 14 days) if the UnitedHealth share price is in-the-money (i.e. above the $280.00 strike price) and therefore assigned on its June 6th, 2025 options expiration date.
UnitedHealth Group Inc. (UNH) -- New Covered Call Position
5/23/2025 Bought 100 UnitedHealth Group Inc. shares at $295.51.
5/23/2025 Sold 1 UNH 6/6/2025 $280.00 Call option @ $22.24 per share.
A possible overall performance result (including commissions) for this UnitedHealth Covered Call position is as follows:
Covered Call Net Investment: $27,327.67
= ($295.51 - $22.24) * 100 shares + $.67 commission
Net Profit:
(a) Options Income: +$2,223.33
= ($222.24 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 100 UnitedHealth Group shares assigned at the $280.00 strike price at expiration): -$1,551.00
+($280.00 strike price - $295.51 stock purchase price) * 100 shares
Total Net Profit Potential (If 100 UnitedHealth shares in-the-money and therefore assigned at the $280.00 strike price at the options expiration date): +$672.33
= (+$2,223.33 option income + $0.00 dividend income - $1,551.00 capital appreciation)
A possible overall performance result (including commissions) for this UnitedHealth Covered Call position is as follows:
Covered Call Net Investment: $27,327.67
= ($295.51 - $22.24) * 100 shares + $.67 commission
Net Profit:
(a) Options Income: +$2,223.33
= ($222.24 * 100 shares) - $.67 commission
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If 100 UnitedHealth Group shares assigned at the $280.00 strike price at expiration): -$1,551.00
+($280.00 strike price - $295.51 stock purchase price) * 100 shares
Total Net Profit Potential (If 100 UnitedHealth shares in-the-money and therefore assigned at the $280.00 strike price at the options expiration date): +$672.33
= (+$2,223.33 option income + $0.00 dividend income - $1,551.00 capital appreciation)
Potential Absolute Return-on-Investment: +2.5%
= +$672.33/$27,327.67
Potential Annualized Return-on-Investment: +64.1%
= (+$672.33/$27,327.67) * (365/14 days)
