By Jud Pyle, CFA, chief investment strategist for the Options News Network

Shares of Unum Group ( UNM) were up over 1% Friday at $11.02. The shares of the life insurance company are now up more than 37% since hitting a 52-week-low close of $7.99 on March 5.

Life insurers have been huge beneficiaries of this rally of the past week, but shares are still well below the levels of last December. Today we saw some call-selling activity in UNM that is a microcosm of how some investors are using this recent rally to sell calls, which is helping to drive down the CBOE Volatility Index (VIX) as well.

Looking at the June 15 strike calls in UNM, we find that they have traded more than 20,000 times vs. open interest of 5,419. The majority of the calls traded for 60 cents, which is an implied volatility of 75. Thursday night, those calls closed at 65 cents, which was an implied volatility of 80 vs. the stock price of $10.84.

One way to conceptualize that this must be a lower implied volatility is the fact that these call options are lower, despite the fact that the stock is higher. The calls fell by 5 cents despite that fact that the stock rose 18 cents. That means that the option-seller believes the probability of the stock getting to 15 by June expiration is lower today than yesterday, despite the stock being closer to $15.

This call activity does not mean that investors should run out and sell their shares. To the contrary, this could likely be one large investor who is willing to hold his shares, but believes that if the stock gets to $15 at June expiration, he would be willing to sell by having them called away. Here at $11.02, the investor is willing to hold the shares, suggesting that at least UNM could hold these levels.

Jud Pyle is the chief investment strategist for Options News Network ( and the portfolio manager of Options Alerts. Click here for a free trial for Options Alerts. Mr. Pyle writes regularly about options investing for
Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."