UnitedHealth Group Plunges 4.1% as DOJ Scrutiny Intensifies—Is This the Death Knell for Medicare Profits?

Summary
• UnitedHealth (UNH) slumps to $279.1, a 4.1% intraday drop, amid mounting DOJ scrutiny.
• DOJ investigation into Medicare Advantage billing practices confirmed in regulatory filings.
• Elevance Health (ELV), sector leader, also down 5.3% as managed care sector faces regulatory headwinds.

UnitedHealth Group’s shares are under fire as the Department of Justice intensifies its probe into Medicare billing practices. The stock has fallen nearly 50% year-to-date amid a cascade of crises, from leadership turmoil to public backlash. With intraday volatility spiking between $279.1 and $289.21, the market is bracing for regulatory fallout that could reshape the healthcare landscape.

DOJ Medicare Fraud Probe Shakes Investor Confidence
UnitedHealth Group’s 4.1% decline on July 24, 2025, is directly linked to the company’s confirmation of a DOJ criminal and civil investigation into its Medicare Advantage billing practices. The regulatory filing cited pressure on doctors to inflate patient diagnoses to secure higher federal reimbursements, a practice the DOJ has now escalated to formal criminal inquiries. This follows months of scrutiny from the Wall Street Journal, which first exposed the company’s tactics in December 2024. The stock’s collapse reflects investor fears of potential penalties, reputational damage, and operational overhauls required to comply with federal mandates.

Managed Health Care Sector Reels as Elevance Health Trails UNH
The managed health care sector is broadly underperforming, with Elevance Health (ELV) down 5.3% on the same day, reflecting shared regulatory risks across Medicare Advantage providers. Both UNH and ELV derive significant revenue from federal healthcare programs, making them vulnerable to policy shifts or enforcement actions. However, UNH’s decline is more pronounced due to its role as the largest Medicare Advantage insurer and the DOJ’s direct focus on its billing practices.

Bearish Options Play as Technicals Point to Continued Weakness
• 200-day MA: 471.66 (far above current price)
• 30-day MA: 302.65 (resistance ahead of $303)
• RSI: 36.68 (oversold, but trend remains bearish)
• MACD: -8.17 (negative crossover with signal line at -7.81)
• Bollinger Bands: Price at $279.1, near lower band at $277.99

UnitedHealth’s technicals confirm a deep bearish trend. The stock is trading below all major moving averages and within the lower Bollinger Band, signaling heightened volatility and potential for further downside. The RSI hovering near oversold levels suggests short-term stabilization may occur, but the broader downtrend remains intact. Elevance Health’s (ELV) 5.3% drop underscores sector-wide weakness, though UNH’s unique regulatory exposure makes it the most vulnerable.

Top Options Contracts:
• UNH20250801P280 (Put Option):
- Strike Price: $280
- Expiration: 2025-08-01
- IV: 69.29% (elevated, indicating high volatility)
- LVR: 22.14% (moderate leverage)
- Delta: -0.4905 (sensitive to price swings)
- Theta: -0.3818 (time decay manageable for short-term)
- Gamma: 0.0131 (responsive to price movement)
- Turnover: $1.89M (liquid)
- Why it stands out: This put option offers a high gamma and delta, ideal for capitalizing on a 5% downside scenario. A 5% move to $266.45 would yield a payoff of $13.55 per contract, with leverage amplifying returns. High IV ensures the option retains value even if the move is gradual.

• UNH20250801C280 (Call Option):
- Strike Price: $280
- Expiration: 2025-08-01
- IV: 74.10% (attractive volatility)
- Delta: 0.5111 (balanced sensitivity)
- Theta: -0.8957 (aggressive time decay, but suitable for short-term rallies)
- Gamma: 0.0123 (moderate responsiveness)
- Turnover: $1.34M (liquid)
- Why it stands out: This call option is a hedge against a potential bounce above $280, which could occur if the stock stabilizes near the lower Bollinger Band. A 5% upside to $294.49 would yield a $14.49 payoff, leveraging the high IV for potential gains. However, theta decay makes it a high-risk, high-reward play.

Trading Outlook: Aggressive bears should prioritize UNH20250801P280 for a 5% downside scenario, while cautious bulls may use UNH20250801C280 for a short-term rebound above $280. Watch for a breakdown below $277.99 (lower Bollinger Band) to confirm the bearish thesis.

Backtest UnitedHealth Group Stock Performance
The backtest of UnitedHealth Group (UNH) after a -4% intraday plunge shows favorable performance metrics. The 3-Day win rate is 54.83%, the 10-Day win rate is 55.86%, and the 30-Day win rate is 57.76%, indicating that the stock tends to rebound in the short term following a significant drop. The maximum return during the backtest period was 1.17%, which occurred on day 50, suggesting that while the stock typically recovers, the magnitude of the rebound varies.

Regulatory Storm Intensifies—UNH Faces Critical Juncture
UnitedHealth Group’s 4.1% drop on July 24 marks a pivotal moment in its regulatory saga. With the DOJ investigation escalating and Elevance Health (ELV) down 5.3%, the managed care sector is bracing for prolonged volatility. Technicals confirm a bearish bias, with key support at $277.99 and resistance near $303. Investors should monitor the DOJ’s next moves and the company’s third-party review outcomes. For now, the put option UNH20250801P280 offers a compelling play on a 5% downside, while the sector’s broader weakness underscores the urgency of hedging exposure. Watch for $277.99 breakdown or regulatory updates to dictate the next move.