Puts surge in volatility fund at new low

optionMONSTER

The iPath S&P 500 VIX Short-Term Futures exchange-traded note collapsed to an all-time low yesterday as puts topped its option volume.

The VXX was down 4.61 percent to close at $19.32, even as the CBOE Volatility Index (VIX) was higher on the day. The VXX is based off the two nearest-month VIX futures, not the spot index reading, and has a daily roll.

The front-month March VIX futures were up 2.9 percent to close at 16, but they settle this morning. (See related story )

This means that the VXX is essentially entirely in the April VIX futures, which were down 4 percent to 19.20 yesterday. That is still a huge premium, and the VIX futures remain in steep contango with increasing premiums going out in time.

The VXX hit a 52-week high of $59.18 in October, but today's move pushed it back below the previous lows from last July.

Just shy of 330,000 VXX options traded yesterday--possibly a new record--compared with a daily average of 72,500 in the last month. Two of the three largest prints in the VIX options came in one spread spread.

A trader bought 13,359 April 19 puts for the ask price of $0.61, under the previous open interest of 42,731, optionMONSTER's Depth Charge shows. At the same time, he or she sold the same number of April 16 puts for $0.15. That volume was more than the previous open interest, so it was a new opening position.

This could be a trader rolling a short put position lower, but it looks more like an outright put spread that would profit with the VXX trading to or below $16 in the next month. Given the premiums in the futures, and that negative roll yield, the VIX would probably not even have to move lower for that goal to be reached.

More From optionMONSTER

Rates

View Comments (0)