Learn the trade here. Make it on tradeMONSTER

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

VIX at lowest close in two months

November 26, 2014

The major equity indexes were mixed but little-changed yesterday, while the CBOE Volatility Index fell to its lowest level in two months.

VIX

Videocast: Caution in the VIX pits?

November 25, 2014

Group One's Jamie Tyrrell dissects large VIX call buying that has continued all week, saying that today's price action indicates that traders may be getting more cautious on the market.

VIX

VIX lower as stocks keep rallying

November 25, 2014

The major equity indexes added to their gains yesterday, sending the S&P 500 and Nasdaq 100 to more new highs while pushing the CBOE Volatility Index lower.

VIX

Videocast: VIX call buyer returns

November 24, 2014

Group One's Jamie Tyrrell says a large trader continues to purchase VIX December 19 and 23 calls, though others are buying put spreads.

VIX

Rally pushes VIX below 13 level

November 24, 2014

Equity indexes closed Friday off its best levels of the morning but still at new highs, pushing the CBOE Volatility Index below the 13 level.

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Free Webinar Series

Using Options for Income

Education & Strategy

Importance of learning the basics

Personally, I could never understand how so many option instructors start teaching strategies before explaining what an option is. I...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER