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Large trade sees further drop in VXX

Chris McKhann (chris.mckhann@optionmonster.com)

The iPath S&P 500 VIX Short-Term Futures Note is pushing back toward all-time lows, and one large trade sees further declines.

optionMONSTER's Depth Charge system shows that a trader bought 10,000 September 15 puts for the ask price of $1.12 and sold the same number of September 12 puts for their bid price of $0.38. The volume was far above the previous open interest of fewer than 600 contracts at each strike, so this is a new put spread.

Earlier in the day more than 10,000 each of the February 24 and 22 puts traded together, but that spread looks appears to have been sold and was below open interest. So it seems that a trader is rolling out of an in-the-money February put spread and opening the out-of-the money spread in September.

This four-way trade represents a bet that the VXX continues to decline, as it tends to do when markets are bullish and/or quiet. The exchange-traded fund is based on the VIX futures, which usually carry a premium to the volatility index.

The VXX is down 2 percent to $22.99 in midday trading, on pace for its lowest close since the end of January. It hit an all-time low of $22.45 on Jan. 24. The fund started in Febuary 2009 at 1600, after its two reverse splits.

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