OptionsHouse

Options Trading News

May 25, 2012  Fri 2:45 AM CT

VIX: SEE CHART GET CHAIN FIND STRATEGIES
The CBOE Volatility Index options had significant volume yesterday, with a couple of big trades coming after the bell.

The VIX finished the day down 3.54 percent at 21.54. It had been above 23 for much of the afternoon. The options volume was topped by the action in the July and August options, which are priced off their respective futures. The July VIX futures were down 1.5 percent yesterday to close at 25.95, while the August futures fell 1.3 percent to 26.55.

The VIX saw more than 715,000 options change hands, 453,000 of which were calls. This compares to a daily average of 280,000 in the last month.

The two biggest trades went off after the stock market's close, as VIX options trade until 4:15 p.m. ET.

A trader bought 20,000 each of the July 40 and 60 calls for $1.17 and $0.22. At the same time, he or she sold 40,000 July 50 calls for $0.47. About three minutes later, 20,000 each of the August 40 and 60 calls were bought for $1.59 and $0.35 respectively as 40,000 August 50 calls were sold for $0.74.

Although the volume at the 40 strike was less than open interest in both cases, it appears that these are new call butterfly spreads. These spreads are designed to profit from a rise of the corresponding VIX futures to 50 by their expirations.

The amount paid to open the positions was very small, just $0.45 in July and $0.46 in August. The potential gains are more than $9.50 under ideal circumstances but would require the VIX to more than double and stay at that elevated level through expiration. (See our Education section)
Share this article with your friends


Related Stories

VIX

Videocast: Traders buying VIX puts

April 17, 2015

Even with stocks down sharply today, Group One's Jamie Tyrrell says traders are buying in-the-money VIX May 16 puts apparently in the believe that volatility will pull back.

VIX

Videocast: VIX call buyer returns

April 16, 2015

A day after the April settlement, Group One's Jamie Tyrrell says a big player is back buying the VIX May 19 and 23 calls.

VIX

Videocast: April VIX settles at 13.81

April 15, 2015

The April VIX contracts settled at 13.81 this morning, but Group One's Jamie Tyrrell says traders are now buying the May 19 and 23 calls.

VIX

Videocast: VIX on eve of expiration

April 14, 2015

On the day before the April expiration, Group One's Jamie Tyrrell says traders are focusing on the VIX 14 puts and 15 calls.

VIX

Videocast: Huge VIX June trade

April 13, 2015

Group One's Jamie Tyrrell breaks down the strategy behind a three-way cash spread in June contracts that traded 650,000 times.

Invest Like a Monster - San Diego: June 26-27

Premium Services

Education & Strategy

Investor deficiency in premium collection

Most investors have heard about selling options as a form of income generation. You hear it from brokers and financial advisors as a way to generate income without selling off pieces of your nest egg, dwindling through your retirement accounts, and then being stuck figuring out how to financially afford the rest of your life...

View more education articles »