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UnitedHealth Group Traders See a Bullish End to the Week

Short-term speculators are scooping up UNH's weekly 1/11 52.5-strike call today

by 1/9/2013 1:44 PM
Stocks quoted in this article:

Dow freshman UnitedHealth Group Inc. (NYSE:UNH - 52.25) is following the blue-chip barometer into the black today, and bullish option traders are taking notice. Roughly 14,000 calls have crossed the tape, outpacing the average intraday volume for call options by a margin of more than 5-to-1. UNH's weekly 1/11 52.50-strike call has emerged as one of the more popular options today, and has seen around 2,700 contracts change hands. Nearly all of these have traded at the ask price, and implied volatility was last seen 2 percentage points higher, suggesting a portion of today's volume is of the buy-to-open variety.

With these near-the-money calls being purchased for a volume-weighted average price (VWAP) of $0.22, traders need UNH to topple the $52.72 mark (the strike price plus VWAP) by Friday's close, at which point these weekly options will expire. This breakeven mark is a slim 0.9% premium to the equity's current perch.

Expanding the scope reveals that today's campaign toward calls has strayed from the recent trend seen in the options pits. The stock's 50-day International Securities Exchange (ISE)/Chicago Board Options Exchange (CBOE)/NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.72 ranks higher than 84% of similar readings taken in the past year. In other words, puts have been bought to open (relative to calls) at a faster-than-usual clip during the past 10 weeks.

Echoing this tendency toward puts is the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.92, which ranks in the 77th percentile of its annual range. Simply stated, short-term speculators are more bearishly skewed than usual toward UNH.

On the charts, the stock is hovering just 1 percentage point shy of breakeven on a year-over-year basis. More recently, UNH has been churning between the $51-to-$55 range since early November. This muted price action makes today's call-heavy session a bit puzzling. However, the equity has spent four of the past six sessions trading south of its lower Bollinger Band, suggesting it was oversold and due for a bounce higher in the near term.

At last check, UNH was up 1.7%, lingering near $52.25.


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