Monday Options Update: VIX, WLP, UNH, CVX, & OIH

CBOE Vix index (VIX) – Risk aversion is back with a vengeance on Monday’s early trade. Following through on Asian market weakness, S&P index futures were already 20 points lower pre-market and haven’t managed much of a bounce since the open. The Vix index has jumped 15% to 27.85 mid-morning, while the October Vix future is back above a reading of 30. In the November options it appears that one investor expects some follow through equity index weakness and positioned accordingly by selling 25 strike put options to lower the cost of 37.5 strike calls. The premium was reduced to just 50 cents but does position the investor vulnerable to a reversal in the direction for stocks, likely to be accompanied by lower implied volatility.

Wellpoint Inc. (WLP) – Bucking the market today with a 3.7% rally in its share price is Wellpoint at $54.08. Indeed the news emanating from Washington that President Obama may look for a compromise to universal health care reform has provided a lift to the sector. Around 10,000 call options have so far traded at the 55 strike price with the severity of the rally making for interesting movements in the premium, which has shifted from 40 cents to 1.25 during the morning. It’s also possible that within this volume one savvy investor has bought and sold at a handsome profit several thousand contracts. Elsewhere in the September contract investors have bought 4,500 60 strike calls where open interest ahead of today’s session was just 5,390 contracts. The uncertainty surrounding changes to government plans is being taken as a positive to healthcare insurance providers and this uncertainty has lifted options implied volatility on this stock by 18% to 44% this morning.

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