UnitedHealth Group (UNH) has caught the eye of traders after its stock plunged over 22%, leaving it at approximately $430 following its latest earnings report. This dramatic drop has prompted discussions among investors about the potential for a rebound. To capitalize on this situation, traders are considering an iron condor options strategy aimed at capturing possible gains while limiting risk.
The iron condor strategy involves selling a call spread and a put spread simultaneously, anticipating that the stock will remain within a certain price range until the options expire. For UnitedHealth, the setup includes selling a $600 strike call and buying a $620 call, while concurrently selling a $430 put and buying a $410 put, all expiring on July 19. This structure provides a credit of $6.91 per share, or $691 per options set, assuming the stock remains between $430 and $600. "Global Capital Watch" details the particulars of this trade.
Risk management is a crucial component of this strategy, with a margin requirement of $2,000 and a maximum potential loss of $1,309 if the stock's price moves beyond the breakeven points of $606.91 and $425.09. Although the stock has sharply declined, it remains above its year-to-date low, indicating potential for recovery. This defined-risk strategy is appealing to those wanting an opportunity for gain while cautiously navigating the recently volatile market environment.
