Options Trading News

August 6, 2012  Mon 1:04 PM CT

The VXX volatility exchange-traded note is at another new low, and put trading dominates its option activity today.

The iPath S&P 500 VIX Short-Term Futures ETN is down 2.64 percent to $11.84, just off a new all-time low of $11.80 reached earlier in the session. It was above $22 two months ago, near $60 at its 52-week high in October.

Total option volume in the name tops 160,000 contracts, with puts outpacing calls by nearly 2 to 1. The most active strike was the September 10 puts with more than 23,000 traded, though at less than open interest of 34,000. They were mostly bought in large institutional blocks for $0.30.

The single largest trade, however, occurred when 6,870 December 8 puts were purchased for $0.44 against open interest of 8,696 contracts as 13,740 December 7 puts were sold in a single print for $0.20 at more than open interest.

So lots of put trading that appear to be looking for the VXX to continue to fall. This may be a view on a lower VIX, but that isn't necessary for the VXX to fall.

The VXX is based on the VIX futures, which usually carry premiums and are in contango, meaning that each successive futures contract carries a higher price tag. In addition, the daily roll in the VXX means that the fund is buying high and selling low every day, which clearly takes its toll on the fund.

The lesson: The VXX can be a great trade, but it should not be confused with an investment.
Share this article with your friends

Related Stories


Call selling hits VXX volatility fund

January 20, 2015

Call selling sees limited upside in the iPath S&P 500 VIX Short-Term Futures Note, which hit an all-time low in mid-December.


Trade sees ceiling on volatility fund

January 15, 2015

The iPath S&P 500 VIX Short-Term Futures Note has seen some big swings in the last month, but one trader is betting on a ceiling for the fund.


Huge trade bets on lower volatility

January 6, 2015

A large trader is looking for a cap to volatility by selling calls in the iPath S&P 500 VIX Short-Term Futures Note.

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

Premium Services

Archived Webinar

Option Money Machine Winter Classic

Education & Strategy

The rolling technique

In the January 7th edition of Advantage Point, we initiated the purchase of a second week-out GOOGL 535 put at...

View more education articles »