A large trader is looking for the iPath S&P 500 VIX Short-Term Futures Note to continue its descent.
The VXX, which is based on CBOE Volatility Index futures, has been both very popular and a very poor performer over the long term. optionMONSTER systems show that the biggest options trade so far in the fund is a May put spread.
A trader bought 5,000 May 19 puts for the ask price of $0.87 and sold the same number of the May 17 puts for their bid price of $0.32. The volume was multiples of the previous open interest at each strike, clearly showing that this is new activity.
This vertical spread cost $0.55 to open, which is the most that can be lost if the VXX remains above $19 through mid-May. The position is betting that the exchange-traded fund will continue its long-term decline, which is caused largely by the VIX futures staying above the spot reading of the volatility index. (See our Education section)
The VXX is up 1.42 percent to $23.60 this morning but well off its high of $26.81 on Monday when the stock market was plunging, its highest level since Jan. 9. The fund was an all-time low of $20.97 last week.