This insurance stock is on an impressive run. How to ride the momentum with less risk

MetLife (MET) It is well positioned in the life insurance and benefits sector, displaying fundamental momentum that the broader market has not fully priced in.

Backed by scale, brand value and an experienced leadership team, MetLife is firing on all cylinders.

• Bonus and Sales Growth: MetLife’s core premiums and fees increased 10% in the first quarter, driven largely by international and domestic demand: Asia increased 22%, Latin America increased 20%, while U.S. Group Benefits increased 15%.
• Unlocking Efficiency Through Artificial Intelligence: While many investors focus on AI companies, they may be overlooking how AI and technological innovations can help businesses in the legacy economy. MetLife is poised to lead the industry in margin expansion (20-25 basis points annually) by keeping expense growth firmly below revenue gains.
• Earnings Power: Consensus estimates earnings per share will grow approximately 25% over the next two years; This growth is expected to increase from $9.94 expected in FY 2026 to $12.40 in FY 2028. Roughly 5% of projected EPS growth is expected from buybacks (just under $1.2 billion remaining in the current buyback program). Strong recent sales, advantageous group life insurance and rising stock markets are increasing alternative investments.
• ROE and Capital Management: MetLife’s average ROE of 17.2% is at the upper end of the 15-17% target range.

Given MetLife’s strong fundamental tailwinds and EPS’s clear path to the upside, I like the September 77.5/87.5/92.5 call spread risk reversal (below) to capture further upside or buy the stock near its long-term average of ~$78.

This allows investors to capture MetLife’s bullish momentum while reducing immediate downside risk following the stock’s recent impressive rally, while also reducing the impact of “theta” (also known as “decay”).

• Defined Risk, Leveraged Reward: By purchasing an in-the-money call, you benefit from the upside of MetLife. By simultaneously selling a higher strike call and a lower strike put, you collect premiums, which lowers your net cost (debt) and reduces your breakeven point.
• Mitigating Volatility: While rising stock markets and strong alternative investment returns create a negative impact for MetLife shares, selling the outside hit helps offset the cost of implied volatility. Note, too, that the September expiration includes earnings (the company is expected to report on August 6) – option premiums tend to decline more sharply after that, a phenomenon sometimes referred to as post-catalyst “volume crush.”
• EPS Timelines: Choosing a September expiration date not only covers upcoming quarterly earnings reports, but also recognizes that the market has been more volatile lately and also covers most of September, which has historically seen above-average volatility.

Trade Management: If MetLife’s shares rise, take the opportunity to “monetize” (i.e. close) the short put and possibly roll the debt call spread up (i.e. to higher strikes) or up and down (over time).