Volatility fund draws large put spread
Chris McKhann | email@example.com
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.
Big trade bets on floor in volatility
March 4, 2014
Volatility is tumbling with this morning's rebound in the markets, but a large trade is betting that the iPath S&P 500 VIX Futures Note won't fall much further.
Trade sees floor in volatility note
March 3, 2014
A large trader is betting on a floor in the iPath S&P 500 VIX Short-Term Futures Note, whose valuation has been cut in half over the last year.
Huge bet on spike in volatility note
February 27, 2014
A large trader bought 30,000 calls in the iPath S&P 500 VIX Short-Term Futures Note yesterday, looking for it to spike higher in coming weeks.
Trader bets VXX will keep falling
February 12, 2014
A large trade is looking for the long-term downtrend to continue in the iPath S&P 500 VIX Short-Term Futures Note, which has been falling along with the volatility index.
Midday index, ETF option volumes
February 10, 2014
After last week's heavy trading, total option volume is below average at 4.7 million contracts so far today, led by the typical indexes and ETFs, according to optionMONSTER data systems.