UNH Stock Rises Overnight Ahead Of Earnings: Analyst Outlines 'Short Premium' Play To Cut January Call Cost By Nearly 60%

(MENAFN- AsiaNet News)

• Khouw's trade sells November $420 calls and $340 puts to help fund a January 2027 $400 call, lowering its cost by nearly 58%.
• UnitedHealth is expected to post $112.4 billion in Q3 revenue, $6.45 billion in EBITDA and $3.06 in earnings per share.
• Oppenheimer noted that UNH's share of members in four-star-or-higher plans fell 15%, while Humana's rose to 95% from 42%.

UnitedHealth (UNH) is set to report third-quarter (Q3) earnings before Tuesday's market open, with options pricing in a 6.5% move around the results. Tidal Financial Group strategist Michael Khouw says elevated options prices create an opportunity for traders to sell November premium to help finance a cheaper January call.

UNH stock rose 0.9% in after-hours trading on Monday after closing the regular session down 0.2% at $378.52.

UnitedHealth Options Price In A 6.5% Earnings Move

“The only thing more expensive than health insurance is perhaps the costs of insuring shares of health insurers,” Khouw said, pointing to UnitedHealth as an example.

Options imply a 6.5% move in UnitedHealth shares around earnings, while implied volatility is running at about 40%, about twice the stock's realized volatility of 20%, he said. The implied move is the second-largest in almost two years. Shares have fallen after five of their past eight earnings reports, including nearly 20% drops after results in January and April 2025, CNBC noted.

UNH Call Play: How The $400 January Call Trade Cuts Upfront Cost By 58%

Khouw's proposed trade is a“short premium” strategy: It sells two November options to collect $10.60 per share and offset part of the cost of a longer-dated call. 

Leg	Trade	Premium Per Share
1	Buy January 2027 $400 Call	Pay $18.20
2	Sell November $420 Call	Collect $5.80
3	Sell November $340 Put	Collect $4.80
	Net Upfront Debit	$7.60

The trade buys a January 2027 $400 call for $18.20 per share, then sells a November $420 call for $5.80 and a November $340 put for $4.80. The resulting net cost is $7.60 per share, or $760 per contract, reducing the call's upfront cost by about 58%. 

What Could Go Wrong If UNH Moves Sharply?

If UnitedHealth finishes November between $340 and $420: The short options would expire worthless. The January call's breakeven would be $407.60 at expiration.

If UNH stock falls below $340: The short put could require the seller to buy shares at that price, for an effective cost of about $347.60 per share after the trade's net debit.

Khouw said UnitedHealth had been essentially flat over five years and traded 12% to 13% below the midpoint of its two-year high-low range. At about 17 times forward earnings, he said, the stock was not priced for a recovery. He sees the company's 13% to 16% earnings-growth target as achievable, though rising healthcare costs is a headwind.

Khouw also pointed to enrollment trends. Affordable Care Act (ACA) marketplace enrollment appears poised to decline, he said, although the segment is smaller than Medicare and commercial coverage. Commercial fee-based enrollment grew about 2.9% from 2024 to 2025, while total Medicare enrollment rose 4.5%. Commercial growth exceeded U.S. workforce growth of about 1.4%.

UNH Q3 Earnings Preview

Koyfin's estimates for the upcoming quarter compare with the last reported quarter. They show revenue of $111.49 billion, down 0.5% sequentially. Earnings before interest, taxes, depreciation and amortization (EBITDA) is estimated at $6.47 billion, down 28%, while earnings before interest and taxes (EBIT) is forecast at $5.44 billion, down 32%. GAAP earnings per share (EPS) are projected to fall 36.81%.

Fiscal's year-over-year estimates show revenue of $112.4 billion, compared with $113.2 billion a year earlier. It forecasts EBITDA of $6.45 billion, up from $5.25 billion, and earnings per share of $3.06, compared with $2.92.

Medicare Advantage Ratings: Wall Street Weighs UNH Against Peers

TD Cowen lowered its price target on UNH to $402 from $430, implying a 6% upside, while maintaining a 'Buy' rating. The firm expects preliminary commentary on 2027 earnings-per-share expectations with the report. 

Meanwhile, Piper Sandler said 66.8% of UnitedHealth members were enrolled in plans rated four stars or higher, based on September 2026 enrollment data, and called the company's resilience“impressive” and underappreciated. Oppenheimer noted that the share of members in four-star-or-higher plans fell 15% at UnitedHealth for 2027, versus 10% at Elevance Health, 15% at CVS Health and 9% at Centene. Humana moved in the opposite direction, with 95% of its members in four-star-or-higher plans, up from 42% a year earlier. 

How Do Retail Traders Feel About UNH?

On Stocktwits, retail sentiment for UNH jumped to 'extremely bullish' from 'bullish' levels a day ago amid a 1,680% surge in 24-hour message volumes.

UNH sentiment and message volume as of October 13 | Source: Stocktwits

One user said,“$UNH beat and raise. 500 incoming”

View this Stocktwits post

Another user said,“$UNH be cool to beat huge and raise. Shorts have to chase to 435.00 plus this week.”

View this Stocktwits post

UNH stock has risen 17% year-to-date.

For updates and corrections, email newsroom[at]stocktwits[dot]com.

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