tradeMONSTER: Trade free for 90 days

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: Huge bet on lower VIX

December 18, 2014

Group One's Jamie Tyrrell says a huge trade is looking for the VIX to fall in coming weeks, selling the January 20 calls and buying the 15 puts 90,000 times.

VIX

VIX below 20 as equities rebound

December 18, 2014

Equity indexes rallied hard yesterday, accelerating higher after the Fed's policy afternoon announcement to close just off session highs. The CBOE Volatility Index fell back below the 20 level.

VIX

Videocast: Premium selling in VIX

December 17, 2014

Group One's Jamie Tyrrell says there has been "a ton" of activity in January VIX contracts, with traders selling premium heavily.

VIX

December VIX settlement 24.09

December 17, 2014

The settlement was above the open for the spot volatility index and well above the low of 22.44 that came shortly after.

VIX

VIX above 23 as equities fall again

December 17, 2014

After a promising start to the session, equity indexes again slipped lower as Russia and oil continued to dominate the news.

Invest Like a Monster - Las Vegas: March 13-14

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Archived Webinar

The Art of Trading: Forgiving the Spread

Education & Strategy

Know thy Greeks!

One of the most important roles played by the Option Pricing Model is the calculation of an important family of...

View more education articles »
optionMONSTER stockMONSTER tradeMONSTER