OptionsHouse

Options Trading News

October 10, 2011  Mon 9:27 AM CT

VXX: SEE CHART GET CHAIN FIND STRATEGIES
The VXX volatility exchange-traded fund is dropping again today, and the options are looking for further but limited losses.

The iPath S&P 500 VIX Short-Term Futures Fund is down another 5 percent this morning to trade at $47.68. It is down 20 percent from last week when it neared $60, its highest level since October 2010.

The big trade in VXX so far this morning in a put ratio spread. A trader bought 2,500 October 46 puts for $1.89 and sold 5,000 October 44 puts for the bid price of $1.07 at the same time. The volume at both strikes was more than open interest, so this is a new postion.

The trade takes a maximum profit if VXX drops to $44 by expiration. Given the strikes used, the position will still be profitable if the VXX remains above $46, though it will stand to make just the $0.25 credit.

If the VXX drops below $44, the trader faces assignment and the obligation to buy shares. The VXX was below $44 on Sept. 21 and was down at a low of $42.12 that day.
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Vega

There is another Greek which measures the effects on an option's price buy changing the amount of extrinsic value in the option, and that Greek is Vega...

View more education articles »