VIX falls, sees late spike in put activity

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The CBOE Volatility Index ended yesterday's session just off its lows as the S&P 500 pushed higher into the close.

The VIX was down 2.52 points, or 10.2 percent, to 22.15. The VIX and the SPX usually move inversely.

The June VIX futures closed at their low of the day of 23.35, down 2.25 points, or 8.8 percent, after opening the day with a move up to 25.25. The July futures were down 1.85 points, or 6.76 percent.

More than 641,000 VIX options traded, comprising 378,000 calls and 263,000 puts. Late in the day it was the puts that traded heavily in about a 30-second span.

Our systems detected the purchase of 37,000 July 15 puts for $0.05 against an open interest of 48,000; 37,000 November 15 puts bought for the ask of $0.20 against no open interest; 37,000 July 17 puts sold for the bid price of $0.20 against open interest of more than 135,000; and two blocks of 17,500 November 17 puts bought for $0.42 and $0.43.

All this put trading appears to be aimed at trying to take advantage of the high levels of volatility and the continued contango--increasingly higher premiums in later-dated contracts--in the VIX futures.

Added to that, the iPath S&P 500 VIX Short-Term Futures ETN (VXX) saw 226,000 options trade, with slightly more puts than calls.

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