UnitedHealth Group is hovering right around the 200-day moving average line, having bounced in the last few trading sessions after three down weeks.
Today, we are looking at an unbalanced iron condor, with a slightly bullish bias. This can be achieved by trading more put spreads than call spreads.
As a reminder, an iron condor is a combination of a bull put spread and a bear call spread.
First, we take the bull put spreads. Using the March 15 expiry, we could sell two put spreads with the 470-460 strike prices. That spread could be sold for around $1.05. Selling two contracts would generate $210.
Then the bear call spread, which could be placed by selling the 540 call and buying the 550 call. This spread could be sold for around $1.
Trading two put spreads for every one call spread gives the trade a slight bullish bias, but also more risk on the downside.
UNH Stock Option Trade Generates $310 In Premium
In total, the iron condor will generate around $3.10 per share, or $310 of premium.
The profit zone ranges between 456.90 and 543.10. This can be calculated by taking the short strikes and adding or subtracting the premium received.
The maximum risk is $1,690 on the put side and $690 on the call side.
If we take the premium ($310) divided by the maximum risk ($1,690), this iron condor trade has the potential to return 18.34%.
Stop Loss On UNH Stock Iron Condor
A stop loss in this case might be calculated based on 25% of capital at risk, so a loss of around $420.
According to the IBD Stock Checkup, UNH stock is ranked No. 5 in its industry group. It has a Composite Rating of 61, an EPS Rating of 92 and a Relative Strength Rating of 28.
Please remember that options are risky, and investors can lose 100% of their investment.
This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions.
Gavin McMaster has a Masters in Applied Finance and Investment. He specializes in income trading using options, is very conservative in his style and believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ
