Elevance Health's 13% Plunge: A Sector-Wide Warning or a Buying Opportunity?

Summary
• Elevance Health (ELV) slumps 13.3% intraday, hitting a 52-week low of $297.26
• Q2 earnings miss and revised 2025 EPS guidance of $30.00 spark investor panic
• UnitedHealth (UNH) declines 1.53% as health insurers grapple with rising medical costs

Today’s market tremor centers on Elevance Health’s catastrophic 13.3% price drop, the largest intraday swing in its 5-year history. The stock’s collapse follows a Q2 earnings report that exposed unsustainable cost pressures in Medicaid and ACA plans, forcing management to slash guidance by 13.6%. With the broader health insurance sector under siege—UnitedHealth and peers trailing the sell-off—investors are scrambling to assess whether this is a liquidity event or a harbinger of systemic industry stress.

Cost Trends and Guidance Cut Trigger Investor Exodus
Elevance Health’s 13.3% freefall stems from a perfect storm of elevated medical costs and guidance revisions. The company’s Q2 benefit expense ratio surged to 88.9%, reflecting 260 bps of year-over-year inflation in Medicaid and ACA plans. Management cited 'unpredictable' ACA enrollment trends and Medicaid rate alignment delays as key culprits. The revised 2025 adjusted EPS target of $30.00—down from $34.15—sent shockwaves through the market, as investors recalibrated expectations for margin compression in a sector already grappling with regulatory headwinds and behavioral health cost spikes.

Health Insurers in Collective Retreat as Cost Pressures Spread
The health insurance sector is experiencing synchronized weakness, with UnitedHealth Group (UNH) down 1.53% as investors draw parallels between Elevance’s Medicaid struggles and broader industry challenges. PwC’s recent projection of 8.5% healthcare cost growth next year—driven by specialty drugs and policy shifts—has amplified sector-wide concerns. Elevance’s 52-week low of $297.26 now sits just 3% above its 200D moving average of $406.07, while UNH’s 1.5% decline suggests market skepticism extends beyond Elevance’s specific operational issues.

Bearish Playbook: Leveraged Puts and ETF Positioning for a Deepening Correction
• 200D MA: $406.07 (far below current price)
• RSI: 34.78 (oversold territory)
• MACD: -12.19 (bearish divergence)
• Bollinger Bands: 398.75 (upper), 361.79 (mid), 324.84 (lower)

Technical indicators signal a high-probability continuation of the downtrend. The stock is trading below its 30D, 100D, and 200D averages, with RSI in oversold territory but no immediate reversal signs. Key support levels at $345.74 (30D) and $400.04 (200D) are structurally vulnerable. With sector peers underperforming and Elevance’s cost trends showing no abatement, aggressive bearish positioning is warranted.

Top Options Contracts:
• ELV20250815P290
- Type: Put
- Strike: $290
- Expiry: 2025-08-15
- IV: 33.39% (moderate)
- Leverage: 39.70% (high)
- Delta: -0.364 (moderate sensitivity)
- Theta: -0.0763 (rapid time decay)
- Gamma: 0.0132 (responsive to price swings)
- Turnover: $125,459 (liquid)
- Payoff at 5% downside (283.67): $6.33
This put offers 217% price change potential with manageable time decay, ideal for a near-term bearish play.

• ELV20250815P300
- Type: Put
- Strike: $300
- Expiry: 2025-08-15
- IV: 32.52% (reasonable)
- Leverage: 25.02% (moderate)
- Delta: -0.504 (high sensitivity)
- Theta: -0.0410 (slow decay)
- Gamma: 0.0143 (high responsiveness)
- Turnover: $316,735 (high liquidity)
- Payoff at 5% downside (283.67): $16.33
This deep-in-the-money put combines high leverage with robust liquidity, offering a 231% return potential if the 52-week low is tested.

Action Insight: If the $324.84 Bollinger Band low is breached, ELV20250815P300 becomes a high-conviction short-side trade.

Backtest Elevance Health Stock Performance
The backtest of ELV's performance after an intraday plunge of -13% shows mixed results. While the 3-day win rate is high at 52.95%, the 10-day win rate is slightly lower at 55.28%, and the 30-day win rate is 50.09%. This indicates that ELV tends to recover moderately well in the short term but faces more challenges in the medium term. The maximum return during the backtest period was 0.18%, which occurred on day 49, suggesting that while there is a chance of recovery, the gains are generally modest.

Sector-Wide Weakness: Time to Secure Your Position or Exit Exposure?
Elevance Health’s 13.3% drop reflects systemic fragility in the health insurance sector, exacerbated by uncontrolled Medicaid and ACA cost trends. With UnitedHealth Group (UNH) down 1.53% and PwC projecting 8.5% healthcare cost inflation next year, the bearish narrative is far from isolated. Investors should monitor the $324.84 support level and sector peers for confirmation of a broader selloff. For those with conviction, the ELV20250815P300 put offers a high-leverage, low-risk play on a potential $280 retest. However, with RSI in oversold territory and MACD divergence unresolved, a measured approach balancing short-side exposure with strategic hedging remains prudent.