Trade Idea – LEAP Long Call on PGR

Disclaimer: The trades discussed in this blog reflect the author's personal strategies and decisions. These are not financial advice and should not be considered recommendations to buy, sell, or hold any financial instruments. The author is not a licensed financial advisor. Options trading carries significant risk, and readers should perform their own research or consult a qualified financial advisor before making any investment decisions. Past performance does not guarantee future results.

Today I opened a long-dated bullish position on Progressive (PGR) using a LEAP call option. With the stock currently trading below consensus targets, this strategy allows me to capture potential upside with a defined risk profile. Analysts’ average price target implies roughly 16% upside, and if the stock achieves that move, my position could return about $3,000 on a $4,500 investment, which I'd say is a very good risk-reward ratio over the next two years.

The Trade

The trade I found is the following:

• Buy 1× Jan 2027 $230 Call (Cost (Midpoint): ~$45.25, or $4,525 total)

The long duration provides time for the bullish thesis to play out, while keeping my downside limited to the initial premium.

The risk-reward profile looks straightforward:

• Max Risk: $4,525 (premium paid)
• Breakeven at Expiration: $277.50
• Potential Upside: If PGR hits the average target, projected gains are about $3,000. A sustained move above that level would increase returns substantially.

This is the historical price for PGR (with weekly candles, to get a better long-term view):

Why PGR?

I’m bullish on Progressive for several reasons:

1. Expanding Auto Insurance Market
Progressive is the second-largest U.S. auto insurer, positioned to benefit as the overall market grows. With average car insurance costs hitting record highs and long-term industry expansion supported by shifting ownership trends and digital adoption, Progressive stands to capture more premium dollars.

2. Leadership in Personal Auto
The company dominates in personal auto insurance, which makes up the bulk of its revenue. Continued growth in applications, supported by strong advertising spend and distribution through both direct and agent channels, reinforces its competitive edge. Profitability in this segment is improving as loss frequency declines and prior-year reserves trend favorably.

3. Consistent Policy Growth
Progressive’s policies-in-force (PIF) have been steadily increasing, driven by both retention and new business. The company’s advanced pricing models, broad distribution, and strong agent partnerships help sustain volume growth, directly translating into higher premium revenue.

4. Improving Retention Metrics
Customer loyalty is trending upward, as reflected in improving policy life expectancy (PLE). Competitive pricing, new offerings, and enhanced communication strategies are helping Progressive retain clients longer, further strengthening its recurring revenue base.

5. Technology-Driven Edge
Progressive has invested heavily in AI, data analytics, and usage-based insurance programs like Snapshot. These tools enhance risk assessment, improve pricing accuracy, and encourage safer driving. Such innovations not only improve underwriting margins but also differentiate the company from peers.

6. Risk Mitigation Through Reinsurance
As a property insurer, exposure to catastrophic events is a key risk, but Progressive has robust reinsurance programs in place. Its aggregate excess of loss agreements provide multiple layers of protection against storm-related losses, preserving capital and stabilizing earnings.

7. Strong Financial Position
The company generates substantial operating cash flows and has a healthy surplus to support growth. Its debt-to-capital ratio remains below 20%, well under management’s 30% ceiling. With $3.5 billion in liquidity at the holding company level, Progressive has flexibility to reinvest or return capital to shareholders.

We'll see how this trade plays out. In the meantime, here is my public trade log.