UCS Market Framework — June 25, 2025

$ELV

TICKER 1 — Elevance Health ELV 0.00%↑

Setup: UCS#3 — Deviation from Mean Setup

Setup Overview

Elevance Health ELV 0.00%↑ has pulled back sharply in reaction to its latest earnings — down ~11–12% intraday — landing near 45–50% below its 52-week highs. That makes this a classic UCS#3: Deviation from Mean scenario: the stock has dropped far beyond its historical average range.

We're now at a support-ish zone, with extreme mean deviation potentially offering a high-probability bounce window — watch if the price action begins to stabilize.

Recent Earnings Summary

(For your information, nothing to do with trade bias)

Financial Highlights (Q2 2025)

• Adjusted EPS: $8.84 ⬇︎ vs. Wall Street’s $9.07 estimate (≈ –2.5%)

• Revenue: $49.4B (+14% YoY), beat forecasts of ~$48.1B

• Net income: $1.74B GAAP (~$7.72 EPS), down from $2.30B a year ago

Guidance & Macro Stress

• Full‑year EPS guidance slashed to ≈ $30 (from prior $34.15–34.85 range) — a 13% downgrade, driven by rising medical cost trends in ACA and Medicaid lines

• Benefit expense ratio surged to 88.9% (+260 bps YoY), compressing margin room despite revenue growth

• Operating expense ratio improved slightly to ~10.0%, showing cost discipline but not enough to offset benefit-cost pressure

Stocks & Sentiment

• ELV dropped ~11% post-earnings, marking its largest intra‑day move in over a year — highlighting how rare such volatility is for this large-cap insurer

• Analyst sentiment remains cautiously positive, but BofA notably cut its price target to $350 (from $420) and flagged Medicaid/exchange shifts as structural headwinds

My Trade Plan (Trader-Focused)

• Structure: Short Put Spread (Credit)
  A modest directional bounce trade, with limited risk and controlled capital outlay.

• Delta Target: ~ 40 Delta — balanced convexity for a somewhat neutral directional thesis.

• DTE: 18-ish - short runway.

• Entry Triggers:

  • Technical signs of stabilization (e.g., higher-low on day chart, tightening range)

  • Volume tick up near support zone

• Risk Management:

  • Risk capped at ~$6 per spread (e.g., $500 for single contract) aiming for $4 profit

  • If bounce fizzles or membership trends deteriorate further, I’m out early.

• Plan B: If price slices through support aggressively, consider a breakout flip into an Iron Condor / Overlapped butterflys targeting short gamma.

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Mental Edge Note

This setup is not about catching the bottom — but about risk-defined participation after a sharp, overextended sell-off. UCS#3 favors entries when markets overreact structurally. Our edge comes from calibrated exposure, not guesswork.

• Disclaimer:
  I am NOT a licensed financial advisor, investment professional, or registered broker-dealer. The strategies, indicators, and trade ideas shared here are for educational and informational purposes only. They reflect my personal opinions, research, and trading approach.

• Trading options and financial markets involves risk. Please consult with a qualified financial advisor or conduct your own due diligence before making any investment decisions. Use of this information is at your own risk.