NEW YORK, Sept 8 (Reuters) - Equity option traders are seeking ways to profit from and protect their investments against expected damage caused by Hurricane Irma, one of the most powerful Atlantic storms in a century as it closes in on Florida.
Irma was about 405 miles (655 km) southeast of Miami, the National Hurricane Center (NHC) said in an advisory at 11 a.m EDT (1500 GMT) on Friday.
The approaching hurricane was been met with a surge in trading volume in the options on insurance companies that have exposure to the Florida market, as traders lapped up defensive contracts.
Over the last few days, trading volume in insurers, including, Heritage Insurance Holdings, HCI Group and Universal Insurance Holdings jumped to several times their average daily volume, according to New York-based options analytics firm Trade Alert.
Shares of Heritage Insurance, HCI Group and Universal Insurance are down more than 20 percent this week. Florida accounted for 13 percent of all U.S. insured catastrophe losses from 1986 to 2015, according to Insurance Information Institute data as of May 2017.
On Friday, nearly 3,000 Universal Insurance options contracts changed hands, about three times the average daily trading volume, according to Trade Alert and trading leaned heavily toward defensive bets.
Recent trading in HCI Group and Heritage Insurance showed a similar trend.
For all three stocks, thirty-day implied volatility - an options-based measure of how much stocks are expected to move in the near term - is at the highest in at least a year, pointing to a heightened sense of investor unease, according to Trade Alert.
"High put volume every day this week, along with a sharp increase in implied volatility in the options, suggest that market participants expect the volatility in shares to continue even after the storms have passed," said Trade Alert options analyst Fred Ruffy.
While insurers have drawn bearish bets traders have been optimistic about the outlook for stocks of building materials makers.
Wallboard maker USG Corp's options changed hands at nearly three times the usual pace on Thursday, with traders betting on an upside for the company.
Trading in options on Louisiana-Pacific and Weyerhaeuser Co , which make wood sidings and panels, has also been markedly bullish over the last ten days.
Hurricanes often create spikes in wood panel prices as homeowners rush to board up windows and structural panel prices could rally sharply in the coming weeks, BMO Capital Markets analysts said in a note on Thursday. (Reporting by Saqib Iqbal Ahmed; Editing by Daniel Bases and Andrew Hay)