What's behind put surge in VXX

Chris McKhann (chris.mckhann@optionmonster.com)
June 6, 2014

An unusual put trade is hitting the iPath S&P 500 VIX Short-Term Futures Note as it continues to see new lows this morning.

A block of 6,833 July 31 puts were sold for the bid price of $1.82 against previous open interest of 17,785. At the same time, 13,666 July 27 puts were bought for the ask price of $0.22 in volume that was 4 times the open interest at that strike and therefore a new position.
This could be a backspread , which would mean that the trader is positioning to profit if the VXX is above $31 or if it continues to drop precipitously. (See our Education section)

The VXX is down 3.2 percent to $30.91 this morning and down 60 percent from its high above $90 last June. Shares were above $900 (after reverse splits) back in 2011.

The exchange-traded note is composed of the two nearest-month VIX futures, which usually carry a premium to the spot reading of the CBOE Volatility Index. That and the daily roll means that the note faces a stiff headwind to performance, especially in bull markets. 

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