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November 27, 2012  Tue 9:27 AM CT

VXX: SEE CHART GET CHAIN FIND STRATEGIES
The VXX volatility exchange-traded note bounced off an all-time low this morning, but one large call spread sees no upside in the near term.

The iPath S&P 500 VIX Short-Term Futures ETN is up 0.74 percent at $29.96 after dipping to $29.32 earlier in the day. It collapsed from above $37 two weeks ago and is down 98 percent from its opening value of $1,600 in February 2009, after two reverse splits.

A trader bought 3,000 December 33 calls for the ask price of $0.88 and sold the same number of December 29 calls for $2.03, according to optionMONSTER's tracking systems. The volume at both strikes was more than open interest, so this was a new credit spread. (See our Education(See our Education section) section)

The trader takes in $1.15, which will be the full profit at expiration if the VXX is below $29. The maximum loss is $2.85 if shares are above $33.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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