UnitedHealth Group Surges 2.78% on Buffett’s $1.6B Bet—Is This the Bottom?

Summary
• Warren Buffett’s Berkshire Hathaway unveils a $1.6B stake in UNH, sparking an 11% rally on August 15
• UNH trades at 11x trailing earnings, a 40% discount to its five-year average P/E of 21x
• Intraday price hits $316.40, a 52-week high, amid sector-wide optimism

UnitedHealth Group’s stock has ignited a frenzy in the healthcare sector, surging 3.72% intraday to $315.3224. The move follows Warren Buffett’s re-entry into the stock via a $1.6 billion investment, signaling renewed confidence in the healthcare giant’s long-term potential. Despite operational headwinds—including a 46% year-to-date decline and a DOJ investigation—the stock’s sharp rebound has outpaced the broader sector, raising questions about whether this is a sustainable recovery or a short-term bounce.

Buffett’s Re-Entry Validates Undervaluation Amid Operational Challenges
Warren Buffett’s Berkshire Hathaway has re-entered UnitedHealth Group with a $1.6 billion investment, marking the first time since 2010 that the Oracle of Omaha has bet on the stock. This move has injected immediate liquidity and psychological support into UNH shares, which had been trading near 52-week lows earlier this month. The investment validates Buffett’s belief in the company’s discounted valuation—currently trading at 11x trailing earnings, up from a 9x low but still far below its historical average. However, the stock’s fundamentals remain under pressure, with medical cost ratios at 89.4%, compressed profit margins, and a revised earnings guidance of $16 per share (down from $30). Buffett’s stake acts as a short-term tailwind, but the long-term recovery hinges on resolving these operational challenges.

Healthcare Sector Rally Gains Momentum as Elevance Trails UNH’s Surge
The broader healthcare sector has seen mixed momentum, with Elevance Health (ELV), the sector leader, rising 2.08% intraday. While ELV’s performance reflects sector-wide optimism, UNH’s 3.72% surge has outpaced peers, driven by Berkshire’s investment. This divergence highlights UNH’s unique catalyst—Buffett’s endorsement—versus ELV’s more generalized sector support. However, both stocks face similar challenges, including rising healthcare costs and regulatory scrutiny, which could limit long-term gains unless operational efficiencies are achieved.

Leveraging Volatility with UNH20250822C315 and UNH20250822P312.5
• 200-day average: 444.73 (well below current price)
• RSI: 58.18 (neutral, not overbought)
• MACD: -5.40 (bearish divergence)
• Bollinger Bands: Current price at 315.32, above the 265.53 middle band

UNH’s technicals suggest a short-term bullish trend amid long-term bearish pressure. Key support lies at the 303.50–304.90 range, while resistance is near the 316.40 intraday high. A breakout above $316.40 could trigger a retest of the 327.50–330.00 range, but a breakdown below $307.51 (200D support) would signal renewed bearish momentum. Given the stock’s volatility, options with high leverage and moderate delta offer asymmetric risk-reward profiles.

Top Option 1: UNH20250822C315
• Code: UNH20250822C315
• Type: Call
• Strike Price: $315
• Expiration: 2025-08-22
• IV: 48.23% (moderate)
• Leverage Ratio: 51.30% (high)
• Delta: 0.4656 (moderate sensitivity)
• Theta: -1.0969 (high time decay)
• Gamma: 0.0225 (high sensitivity)
• Turnover: $15.5M (high liquidity)

Top Option 2: UNH20250822P312.5
• Code: UNH20250822P312.5
• Type: Put
• Strike Price: $312.5
• Expiration: 2025-08-22
• IV: 40.94% (moderate)
• Leverage Ratio: 54.51% (high)
• Delta: -0.4776 (moderate sensitivity)
• Theta: -0.0878 (low time decay)
• Gamma: 0.0266 (high sensitivity)
• Turnover: $783,780 (adequate liquidity)

UNH20250822C315 offers a 51.3% leverage ratio with a delta of ~0.47, balancing directional exposure and time decay. A 5% upside to $331.10 would yield a payoff of $16.10 per contract, translating to a 31.4% return on the $51.30 leverage. High gamma ensures the option’s delta increases as the stock rises, amplifying gains. UNH20250822P312.5 provides 54.5% leverage with a delta of -0.48, offering downside protection if the stock corrects. A 5% downside to $300.00 would yield a payoff of $12.50 per contract, a 23.0% return on the $54.51 leverage. Low theta minimizes time decay, while high gamma ensures the delta becomes more negative as the stock falls, amplifying gains.

If $316.40 breaks, UNH20250822C315 offers aggressive upside potential. For cautious bears, shorting UNH20250822P312.5 could capitalize on a breakdown below $307.51.

Backtest UnitedHealth Group Stock Performance
The backtest of UNH's performance after a 3% intraday surge shows favorable results, with the 3-Day win rate, 10-Day win rate, and 30-Day win rate all at 100%. This indicates that following an intraday surge of 3% in UNH, the stock tends to experience positive short-to-medium-term gains. The maximum return observed was 12.06% over 30 days, suggesting that there is potential for significant gains following the intraday surge.

UNH at a Pivotal Crossroads—Act on Key Levels Before Volatility Fades
UnitedHealth Group’s 3.72% surge is a short-term win driven by Berkshire’s investment, but the stock’s long-term trajectory remains tied to resolving operational inefficiencies. The 315.32 level is critical—breaking above it could trigger a retest of the 327.50–330.00 range, while a breakdown below $307.51 would reignite bearish momentum. Sector leader Elevance Health (ELV) is up 2.08% intraday, suggesting broader healthcare optimism, but UNH’s unique catalyst (Buffett’s stake) gives it an edge. Investors should monitor UNH’s ability to sustain above $315.32 and watch for Elevance’s momentum to confirm sector-wide strength. Act now: Buy UNH20250822C315 if $316.40 is breached; short UNH20250822P312.5 if $307.51 fails.