Get Me Some VIX

• Posted by Adam Warner
• on January 20th, 2010

Some trades from yesterday via Cuttone and Company

The Massachusetts’ senate seat  election was the focus for healthcare traders. In UnitedHealth Group Incorporated (UNH $35.13), traders looked to the February 37 calls. Over 9,700 traded on the day, more than double the open interest. It was a similar story in CIGNA Corporation (CI $37.92) as the February 39 and 40 calls were active, trading over 7,600 contracts combined. This volume is not eye opening unless you consider open interest was 748 contracts combined.

One customer is betting on a spike in volatility via VIX options. They purchased 50,000 February 27.5 calls for $.60 delta neutral vs. 21.50 futures.

In Teva Pharmaceutical Industries Ltd. (TEVA $58.17), we saw the June 60, September 62.5 call spread trade 4,400x for $.20. The trader bought the June and sold September.

In non-options, lots of yapping about the recent volume surge in VXX. Bill Luby does not read much into it, I would tend to agree. We have about a year’s worth of data on VXX, and most of that year has seen steadily declining realized volatility and options volatility lagging to catch up. VXX proxies VIX futures, which have maintained a perpetual premium to VIX. Yada yada yada, if someone’s accumulating VXX for whatever reason, not sure I’d read much more into it than I would these FEb. 27.5 calls from up above. All forms of VIX speculation/portfolio hedging have been dead wrong for the better part of the past 10 month’s or so. At some point one of these trades will coincide with a lasting volatility rally. There’s no particular reason to suspect either of these is The One.

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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