UNH LEAPS & Covered Call Strategy: Potential Income Play on Healthcare Giant

Investment Analysis & Recommendation

Asset Strategy Identification:

• Stock Ticker: $UNH (UnitedHealth Group)
• Investment Terminology: Poor Man's Covered Call (PMCC), LEAPS (Long-term Equity Anticipation Securities), Covered Calls, In-The-Money (ITM), Delta, Cost Basis, Premium, Options, Weeklies.
• Strategy Discussed: The user is using a PMCC strategy on UNH. This involves buying deep ITM LEAPS calls (e.g., $300 strike, Jan 2026 expiry, aiming for >0.80 delta) and then selling shorter-dated (e.g., weekly) covered calls against these LEAPS.
• Objective: To generate income from selling calls, thereby reducing the net cost of the LEAPS, while maintaining long-term bullish exposure to UNH with leveraged capital.

Sentiment & Discussion Analysis:

• Sentiment on UNH: Generally bullish among the Reddit poster and commenters, expecting long-term appreciation.
• Sentiment on Strategy: Positive and supportive, with an understanding of the mechanics and goals. Some caution is expressed regarding market conditions, company guidance, and potential over-extension.
• Discussion Volume: Active, with multiple participants engaging in the strategy's details.
• Key Catalyst Noted: Upcoming UNH investor meeting (Monday, 10 am), with hopes for reinstated guidance and a share buyback announcement. This is a significant event that could influence UNH's stock price.

Investment Opportunity & Recommendation:

The Poor Man's Covered Call (PMCC) on UnitedHealth Group ($UNH) is a sophisticated options strategy suitable for investors who:

1. Are bullish on UNH's long-term prospects.
2. Are experienced with options trading and understand the associated risks, including greeks (Delta, Theta, Vega), assignment, and management of spreads.
3. Are seeking leveraged exposure to UNH with a lower capital outlay compared to owning shares directly.
4. Are aiming to generate regular income to reduce the cost basis of their long position.

Investment Plan & Considerations:

• Thesis: The strategy relies on a continued or renewed bullish outlook for UNH. The upcoming investor meeting is a critical near-term catalyst that could validate or challenge this thesis.
• LEAPS Selection (as exemplified by the user):
  • Deep ITM: Choosing LEAPS with a high delta (e.g., >0.80, like the $300 Jan 2026 call) ensures the option's price closely tracks UNH stock movements.
  • Long Expiry: Provides ample time for the bullish thesis to play out and for many cycles of short call selling.
• Selling Covered Calls (Short Leg):
  • Frequency: Selling weekly calls can maximize income but requires more active management.
  • Strike Selection: Typically OTM, aiming for strikes above the LEAPS breakeven to ensure profitability even if assigned, or further OTM to reduce assignment risk and allow more upside for the LEAPS.
  • Management:
    • Roll: If UNH rises towards the short call strike and the investor wishes to maintain the LEAPS, the short call can be "rolled" up (to a higher strike) and out (to a later expiration) for a net credit or small debit.
    • Manage Assignment: If the short call expires ITM, the LEAPS will be sold to cover the assignment (if not rolled). This closes the spread for a profit (difference between LEAPS appreciation plus premiums received, minus initial LEAPS cost).
• Key Event - Investor Meeting:
  • Potential Upside: Positive news (guidance, buyback) could significantly boost UNH stock. Consider buying back any short calls before the event to capture full upside on the LEAPS if a very strong positive move is anticipated.
  • Potential Downside: Disappointing news could negatively impact the LEAPS value.
• Risk Management:
  • UNH Price Decline: A significant drop in UNH stock will lead to losses on the LEAPS, potentially exceeding the premiums collected from short calls.
  • Volatility (Vega): Changes in implied volatility will affect both the LEAPS and short calls.
  • Time Decay (Theta): While beneficial for the short calls sold, theta erodes the value of the long LEAPS (though less impactful for deep ITM LEAPS). The net theta of the spread should be monitored.
  • Cost Basis vs. True Breakeven: Continuously track the net cost of the LEAPS after collected premiums to understand the true breakeven of the long position.
  • Active Management: This is not a "set and forget" strategy. It requires ongoing monitoring of UNH's price, volatility, and management of the short call positions.

Conclusion: The PMCC strategy on UNH, as outlined, aligns with a bullish long-term view and aims for income generation and cost reduction. It leverages options to achieve stock-like exposure with reduced capital. Success depends on UNH's performance, effective management of the options positions, and a clear understanding of the risks involved. The upcoming investor meeting is a crucial event to monitor. Investors considering this strategy should ensure it aligns with their risk tolerance and options trading expertise.