The only thing more expensive than health insurance is perhaps the costs of insuring shares of health insurers. Case in point: UnitedHealth Group, which reports earnings Tuesday.
Implied volatility is running at twice realized volatility ahead of the October 13 quarterly earnings release. In other words, options prices - the cost of insuring the underlying stock - are expensive, which sets up well for short premium strategies.
In the case of UnitedHealth shares, traders can sell November premium to cut the cost of a longer-dated January call by more than half. UnitedHealth heads into Tuesday's report with much of the damage from its prior missteps already priced in. While rising healthcare costs always remain a headwind, management's 13% to 16% EPS growth target looks achievable. The stock has basically been flat over the last five years.
By the way, according to the company, 90% of United's 52 million customers worldwide are in the U.S. By its own statistics, the company covers about 12% to 13.5% of the U.S. population.
At 17 times forward earnings, and with free cash flow at 5.7% of enterprise value and 6.5% of market cap, the stock isn't priced for any recovery. On the options side, the market is implying 40% volatility for a stock that's been realizing 20%. Granted. The 40% number captures this week's earnings, and it's likely elevated because the stock has had a couple of eye-watering earnings moves in the past 8 reported quarters. In January, the stock fell almost 20% following earnings, and April 2025 saw a similar sharp decline.