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UnitedHealth Group reports its quarterly earnings on October 13, with options prices currently reflecting implied volatility at twice the level of realized volatility.
This pricing structure indicates that the cost of insuring the underlying stock is elevated, a condition that sets up opportunities for short premium strategies.
According to Cboe LiveVol data, current options prices imply a 6.5% move in the stock following the report, which represents the second highest implied move in nearly two years.
The valuation gap exists because the market is pricing in 40% volatility for a stock that has been realizing 20%.
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