A large print in the CBOE Volatility Index (.VIX) was part of a strategy where an investor bought 80K November 40 calls, sold 20K Nov 25 – 27.5 strangles. Collected 79 cents and all was tied to VX futures at 29.5, delta neutral, according to a floor contact. VIX is down .52 to 24.57.
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CBOE Volatility Index (.VIX) $24.59 -1.99%
Posted on August 21st, 2009 12:53 pm
by fredruffy in All Indexes
(2 votes, average: 5.00 out of 5)You need to be a registered member to rate this post.
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6 users commented on " CBOE Volatility Index (.VIX) $24.59 -1.99% "
Follow-up comment rss or Leave a TrackbackAny guesses on the strategy here. Looks like a bet on VIX staying between the two strikes of the strangle, but hedged with long calls and short futures. Not sure on this one.
weird play. i guess the player is probably long in their portfolio. And if VIX falls under 25 (they’re protected for the .79) and with VIX down the market will be up
Sounds like a portfolio hedge to me too, but just thinking about the math.
Interesting trade Fred. I myself am still long somen VXX with VIX puts as outlined a while back, but sold a lil bit (50 VXX & 5 VIX puts) as the implied vol came in on VIX puts when VIX el tankoed Friday.
Regardless of the upside:
So, if he “sells” the strangle….ideally, the trader would like VIX to settle into the 26 range (or 26.25 to be exact) correct?
Selling the strangle I guess, same as selling a condor I guess, but with no “wings”.
If VIX closes down to 23 or so into NOV, then he might be a little off, loses the upside calls and is in for some pain. However, if he’s neutral and they bid up the calls in NOV, then he might be in luck, so my guess is he simmply expects VIX to trade in betw. 26.25+his cost, so around 30 like u mentioned.
I’m not sure why he made it so complex. I would have just sold a downside condor or iron condor on VIX!!!
Eh, Fred speaking of index options though, did you check out my .UKX (MINI FTSE) calls we talked about a couple of months ago (doubled of course Friday!!!!!!!! wow!). Sold them WAY too early….ugh ……….hate that!
*tear*
Happy Trading,
Ray
Still makes no sense to me on this trade either. This is basically *selling* a condor, but only applying one wing (the upside). Guess he expects a big move or flat like you implied…….but there is still a lot of others buying puts against VIX……
OK, maybe I’m putting too much thought into this, but why didn’t he just simply sell the 25-30 VIX NOV gut strangle instead of a regular one?
Sell NOV 25 calls@5.8 & NOV 30 puts @3.7?
Lot of premium shifting either way. Sounds like he has a lot of margin for this initial trade, that’s for sure.
Fred, did you see .XOI contracts? hmmmmm
jeez….u know me
I trade indexes a lot more than I trade equities. Missed it but a lot of unusual positioning Fri I guess (just now noticed it). I haven’t checked .OSX yet.