Achieved ROI of 96% in 21 Days on UNH Using Debit & Credit Vertical Spreads.

This article is about a trade I entered on UNH which made about 96% ROI in 21 days.

On 27th Dec, Friday, UNH chart catches my attention. I assessed the chart and took the outlook that price should go up from the current levels before earning announcement on 16 Jan 2025, based on the following considerations:

1. Price had been oversold for the past few weeks and looks like found its bottom around $476.43.

2. There is no major change to UNH business and the current price of $509 seems to be undervalue.

Technical analysis of the UNH chart.

So, I decided to opened a Bull Call Spread of strike price $515/$525, DTE: 17 Jan 2025 (during the earning announcement week). The trade cost me $820 for 2 contracts. I was thinking of ways to reduce this cost. And I wondered, should I opened a Cash Secured put, Bull Put Spread or Bear Call Spread? I decided to opened a Bear Call Spread of strikes $560/570 at the same DTE as the Bull Call Spread, collecting $160 credit for 2 contracts. My considerations for choosing Bear Call Spread are:

1. I excluded cash secured put because I don’t have enough capital to own 100 shares of UNH.

2. I excluded bull put spread because I cannot find a good support levels with reasonable credits. Furthermore, price may continue the down trend which may increase my risk.

3. Bear call spread seems to have higher probability of winning. This is because, for the price to reach the short call of bear call spread of $560, it has to pass through a few resistance, namely, 21 EMA of $524.48, 200 moving average of $541.16 and support level of about $555.

4. If I opened bear call spread and price goes down, I am risking $660, which is approx. 1.5% of my total capital. This is within my risk appetite.

5. If price falls between $525 to $560 on expiry date of 17 Jan, my max reward is $1,340. This is approx. 2X my risk. Pretty wide range of winning correct?

Between 14 to 16 Jan, the price reaches around the sweet spot and I decided to close my trades to avoid the risk of earning announcement causing price to move against me. There are some luck with my closure and I managed to profit about $638 (ROI 96%) in total.

I closed my trades during the 3 days.

My real money trades. Profited $638.

In summary, I have presented a method using option strategies for risking a small capital for potentially high returns. And, you can also decide a price range for higher probability of success.

Comment below if you have any queries. If response is good for such article, I will share more review of my option trades (lost or profits), for educational purpose.

Do also comment below if you have a stock in mind and would like to use options strategies. I may write an article of your suggested stock for discussion and education within this community 😊.

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