It’s a divisive, lightning-rod topic, but Obamacare is very much in play right now.
The Senate has just voted to repeal key provisions of the Affordable Care Act, and UnitedHealth Group Inc. (NYSE: UNH) – the planet’s biggest provider of healthcare plans – has been threatening to walk away from it all.[ad#Google Adsense 336×280-IA]At the same time, it’s open enrollment season – and it will be until Jan. 31, 2016.
Enrollments are surging now – 540,000 and counting – as people sign up to get access to healthcare… or to avoid the stiff tax penalty for not having coverage.
But… where there’s controversy, there’s often profit.
And right now the Money Calendar is flashing the prospect of big healthcare sector gains – no matter what the politicians do…
This Is a Huge Bullish Catalyst for All of Healthcare
The president’s signature legislation has helped fuel a (lucrative) boom of consolidation and M&A in the healthcare sector this year – with high-dollar deals like Anthem Inc.’s (NYSE: ANTM) $54 billion bid for Cigna Corp. (NYSE: CI) and Aetna Inc.’s (NYSE: AET) $37 billion offer for Humana Inc. (NYSE: HUM) – that’s only just beginning to cool off.
In other segments, we’re beginning to see companies – mainly big pharma operations with expensive drugs on the market – come under political pressure to prove the value they claim to provide.
But healthcare plan providers have it made.
The nature of Obamacare itself has been a boon to healthcare plan providers and insurance companies almost across the board: mandatory customers tend to be good for a bottom line.
Of course, the prospect of more sales, combined with in-line or contained costs, make these shares attractive to stock buyers. And when long interest pours into a stock, options traders like us have the opportunity to pick up some quick profits with call options.
I mentioned that UnitedHealth is one of the largest health plan providers in the world. Their offerings range from individual plans right up to coverage for some of the country’s biggest employers.
And by the way, the shares are the eighth “heaviest” weighted component of the Health Care SPDR ETF (NYSE Arca: XLV), which is a terrific healthcare play in its own right.
Here’s When to Make the Trade
UnitedHealth Group is all over the Money Calendar this week, showing an average profit of $3.84 over a date range of Nov. 23 to Jan. 1. That is a 31-day bull run that UNH has historically pulled off with aplomb.
Indeed, the Money Calendar shows this run has been made successfully in 10 of the past 11 years. The only “hiccup” here happened in 2012, when it went negative to bounce back in 2013 and continue on to this year.
The savvy play on these shares right now is to pick up UNH in-the-money calls expiring before Dec. 31, 2015.
But the really savvy play is to do that while you track both UNH and XLV’s performance to set up even more “open enrollment” profits in 2016.
Don’t worry – I’ll be doing the same, and I’ll keep you posted.
— Tom Gentile[ad#mmpress]
Source: Money Morning