UnitedHealth (UNH) stock has had a rough time lately. And truly, that is a tremendous understatement. From the tragedy surrounding the murder of its CEO to scrutiny over its allegedly questionable practices and sector-wide pressures, the pain for UNH stock has been well-documented. 

UNH is a member of the exclusive Dow Jones Industrial Average ($DOWI), which, as opposed to the more popular S&P 500 Index ($SPX), contains only 30 stocks. And for some time, UNH was the Dow’s largest weighted holding. But the Dow is weighted by stock price. So when UNH’s stock price fell, fell again, then fell some more, it dropped all the way down to number 8! 

UnitedHealth is one more bad trading day from falling out of the top 10. At the risk of giving away my lack of youth, UNH reminds me of the old Laurel & Hardy comedy team line: “Well, this is another fine mess you’ve gotten us into!”

However, as I’ve written here recently, UNH’s losses might be an opportunity for those who sidestepped the aforementioned mess. Option collars, whereby one purchases stock in 100-share round lots and creates the “collar” by selling covered calls and buying protective puts, is a very fitting strategy for stocks that are, shall we say, down on their luck. In fact, I’ve used the phrase “dog collar” as my pet name (pun intended) for collaring stocks that are in the proverbial dog house with investors. 

In plain terms, the combination of the stock’s volatility and the options market’s liquidity can create a scenario where one can buy a stock like UNH, support it via a collar, and by doing so commit to a temporary price range that keeps maximum loss low, and potential gains high. 

However, I personally do not think UNH is a good candidate for many investors. And I have a few reasons for that. Sometimes it just makes more sense to pass. 

3 Reasons UNH Stock Makes a Collar Unattractive 

Reason #1: The chart is still in turmoil. Below, see a weekly view going back 5 years. We have to go back that far to find a time when UNH’s stock traded around its current level. That was just after COVID-19 hit. Yes, that long ago.

A weekly PPO that is still showing no signs of bottoming does not mean it can’t stop falling. But that’s like saying a 10-1 shot at this Saturday’s Belmont Stakes is a sure thing. Can happen does not equal likely to happen.

Reason #2: The collar pricing is not ideal. I’m presenting below a trio of combinations, simply to show how much flexibility there is in the collar world. And while the out of pocket cost (net debit) to put on collars such as the three shown here is not outrageous (around 5% of the stock price), the upside is not high enough versus the risk of further loss. There are many other combinations of puts and calls to examine, but as noted, this is not compelling to me. And, since I’m writing a lot about collars here, I don’t want to convey the sentiment that every collar is one to run in and buy. 

Reason #3: The dollar price per share is too high. That sounds counterintuitive for a stock that has fallen this much. However, UNH still sells for nearly $300 a share. Recall that one put or call option represents 100 shares of stock. So unless an investor wants to be exposed to what is effectively a short position via the call option, if one call was sold to open, but fewer than 100 shares were owned, this transaction will cost around $30,000 to initiate. I am not going to pretend that every investor reading this has that kind of money to throw around, much less for a single stock and collar.

UNH: Not All Stocks Make Great Collar Candidates

So for UNH, trading it with a “dog collar” just doesn’t add up. Sure, the stock could eventually find a bottom and be a nice contrarian candidate. But to bet on that now, an investor has to have a lot of faith that the negative headline risk will suddenly reverse course. I’d need to see more technical evidence pointing north before I’d take more than a token position here. 

In the meantime, let’s see how UNH fares as it tries to work its way out of the unhealthy situation that has made it a headliner in 2025. For all the wrong reasons.