Move over Tesla, UnitedHealth is the battleground stock for retail traders this week as options trading explodes

Retail darlings like Palantir Technologies, Nvidia, and Tesla have had to make way for a new battleground stock on popular investing forums in the last week: embattled stock UnitedHealth.

After the shooting of its CEO last year, America’s largest healthcare insurance provider, UnitedHealth, has been under increased scrutiny — becoming a lightning rod for anger and debate over America’s healthcare system.

Now, the company’s sickly stock itself has become a flashpoint.

After plummeting by 50% between April 16 and May 16, UNH has attracted a legion of traders looking to profit from the wild swings in what used to be one of America’s most boring, stable companies, with data from SwaggyStocks — which tracks sentiment on sites like Reddit’s r/wallstreetbets — revealing that it’s the most-discussed ticker on the forum over the last seven days.

Risk factors

Since reporting weak earnings in mid-April, UNH’s stock has been under pressure. On May 13, the company suspended its guidance, the same day CEO Andrew Witty abruptly stepped down for personal reasons, contributing to shares dropping another 18% in one day.

Some retail traders have taken swings at catching the falling knife by “buying the dip.” Those that did so post-Witty exit were burned just days later on May 15, when The Wall Street Journal reported that UnitedHealth was under investigation for possible Medicare fraud, triggering another 11% fall in the company’s equity. On that day there were more than 3,700 mentions of UNH on Reddit’s infamous investing forum, per data tracked by SwaggyStocks.

So, why has UNH grabbed retail traders’ attention?

The simplest answer is that it’s been super volatile, and traders with short-term investing horizons like the opportunity that volatility brings, even if it also means a lot of risk. Data from Bloomberg confirms that a lot of action has spilled over into the options markets, with put and call volumes spiking 820% in the five days leading up to May 19, relative to the previous week of trading.

But, of course, plenty of stocks are volatile, so why has UNH captured the retail zeitgeist so strongly?

One explanation might be that UnitedHealth’s business — or perhaps more accurately, criticisms thereof — is increasingly prominent in internet culture, and therefore the minds of retail traders. Luigi Mangione, the prime suspect in the killing of UnitedHealth’s CEO Brian Thompson, has become something of a folk hero for people railing against corporate greed and America’s health system.

It’s a nice theory, but it doesn’t seem to quite add up. Options volumes jumped modestly around the time of Brian Thompson’s murder, and on Luigi Mangione’s subsequent arrest five days later in December of last year, but they didn’t do anything like what we’ve seen in the last week when the UNH price action was much more extreme. If this were a counterculture “Main Street vs. Wall Street” moment, it feels like the most plausible time for it to have happened would have been four to five months ago.

Furthermore, while it’s true that bets against the company have risen, so have bullish trades. Indeed, the put/call volume ratio for the last five days of trading is just 0.68 — a fairly unremarkable figure that means traders are still buying more calls than puts.

Data from Robinhood all but kills the idea that the spike in trading is politically motivated, with Robinhood’s tracking of retail traders revealing that they have mostly been bullish on UNH stock. Customers have been net buyers in each of the last 10 trading sessions.

(Sherwood Media is an editorially independent subsidiary of Robinhood Markets Inc.)

A spate of large insider buys — most notably by the company’s new CEO, Stephen Hemsley, who reportedly spent $25 million acquiring UNH shares — helped to turn the stock around on Monday.

More likely, then, it seems that UNH was simply a candidate for old-fashioned dip-buying: an historically stable, (now) well-known company that’s hit a rough patch. Of course, the dip can always resume dipping.