GoHealth is one of three publicly-traded telehealth insurance brokers (along with eHealth and Select Quote) with proprietary technology platforms leveraged by machine-learning algorithms from two decades of data to help consumers find the best health insurance plan for their specific needs. They sell primarily Medicare insurance policies in partnership with the nation's leading health insurers -- so GoHealth has no underwriting risks. It was founded in 2001, but its Initial Public Offering (IPO) was just over one month ago at $21 per share. Its co-founders still serve as CEO and Chief Strategy Officer. Since the IPO, the stock price has declined dramatically. But with their excellent platforms, strong insurance company partnerships, and use of trained in-house sales agents, GoHealth seems well-positioned for excellent future growth from their Medicare Advantage telesales business.
As detailed below, the potential return-on-investment result is +7.5% absolute return in 26 days (equivalent to a +105.6% annualized return-on-investment). Given the substantial price decline since its IPO, this is a risky investment but the Covered Calls Advisor thinks the huge potential returns make the risks worthwhile. But because of the heightened uncertainty, a relatively small initial investment was made.
GoHealth Inc. (GOCO) -- New Covered Calls Position
The Buy/Write transaction was as follows:
08/24/2020 Bought 400 shares of GoHealth Inc. stock @ $15.00 per share
08/24/2020 Sold 4 GoHealth Sept 18th, 2020 $15.00 Call options @ $1.05 per share
Note: the Implied Volatility of these Calls was very high at 61.6 today when this transaction was made.
A possible overall performance results (including commissions) if the stock price is above the $15.00 strike price at expiration would be as follows:
Covered Call Cost Basis: $5,582.68
= ($15.00 - $1.05) * 400 shares + $2.68 commission
Net Profit Components:
(a) Options Income: +$420.00
= ($1.05 * 400 shares)
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GoHealth stock is above $15.00 strike price at Sept 18th expiration): +$0.00
= ($15.00 - $15.00) * 400 shares
Total Net Profit: +$420.00
= (+$420.00 options income +$0.00 dividend income +$0.00 capital appreciation)
Absolute Return: +7.5%
= +$420.00/$5,582.68
Equivalent Annualized Return: +105.6%
= (+$420.00/$5,582.68)*(365/26 days)
The downside 'breakeven price' at expiration is at $13.95 ($15.00 - $1.05), which is 7.0% below the current market price of $15.00.
