Options Trading News

November 12, 2013  Tue 3:16 AM CT

The iPath S&P 500 VIX Short-Term Futures Note has been hitting all-time lows recently, but traders apparently believe that further downside will be limited.

A block of 9,300 November 46 puts was sold for the bid price of $0.28 yesterday, according to optionMONSTER systems. Earlier in the morning, 2,200 December 44.50 puts were sold for $0.47. There was no previous open interest at either strike, so these are new positions.

The put selling is setting floors of $46 and $44.50 for the VXX and are therefore betting that volatility will pick up. (See our Education section)

The VXX finished the day at $48.52, yet another new closing low. The fund is composed of the nearest two months of VIX futures, and because of that structure it consistently will trend toward zero. It has had three reverse splits since its inception in early 2009 at $6,400.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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