From the Desk

• Posted by Adam Warner
• on December 22nd, 2009

Some big trades yesterday from Cuttone and Company

Aetna (AET)  traded up on news the healthcare bill lacks a public option. One trader sold 5,000 January 33 calls @ $2.10 to buy 10,000 January 35 @ $1.10. This may be a customer rolling his long up as the 35 calls were to open.

 Micron (MU) is slated to report earnings after the bell today, yet bulls wanted in on the action during Monday’s trade. One of the larger trades was the sale of 10,000 January 9 puts @ $.41  to buy 10,000 January 10 calls @ $.29. MU’s average event move over the last 7 reports is 5.98% with the largest being a 12.73% decline last June.

 The trend of forecasting higher volatility going into the new year continues in the VIX. Traders have been selling puts and buying calls for quite some time now in the forward months. This was evident in the January 22.5 puts as traders sold them to buy calls. The volume was not massive but the trend has been clear.

And of course those VIX options plays took place amidst an awful day in the VIX itself. VIX products just continue to overanticipate a spike in volatility that never seems to happen. Yes they will converge a bit once the holiday period passes, so VIX futures should have a premium now. But it’s not just the holiday’s. As we well now, it’s a good half year of this pattern.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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