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Why trader is selling calls in the VXX

Chris McKhann (chris.mckhann@optionmonster.com)

As the VXX volatility note hits another new all-time low, one large trader is betting on a ceiling in its shares.

More than 248,500 options have change hands in the iPath S&P 500 VIX Short-Term Futures Note so far, already topping its full-session average for the last month. A trader sold 18,555 September 26 calls for the bid price of $0.26 in volume that was twice the previous open interest, so it was a new position.

These calls may well have been sold naked, as the VXX has a structure that often attracts downside plays. The VXX is composed of the two nearest-month VIX futures, which are usually higher than the spot volatility index. (See our Education section)

Today it is down 2.02 percent to $16.47 this afternoon. The exchange-traded note hit a low of $16.32 earlier in the session, but the VIX futures have been climbing in the last hour or so. The VXX last closed above $26 in January. 

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