CBOE Volatility Index (.VIX) $18.26 -0.38%

| October 25, 2012 | 0 Comments More

The recent flurry of activity in the VIX pit is due largely to one four-legged options spread. The index is down .41 to 17.92 and one investor sold 57,000 Nov 21 – 35 call spreads on VIX at 95 cents to buy 100,000 Dec 23 – 35 call spreads for 98 cents. The activity in the December contracts looks opening and the overall action probably rolls a position out one month and up in strikes. If so, the position adjstument seems to reflect diminishing expectations for a substantial increase in volatility through the VIX November expiration (26 days), but possibly a spike before the December options come off the board (54 days). Looking at trade history, the Nov 21 – 35 call spreads were possibly opened on 9/28 when both contracts traded more than 57000X, including the Nov 21 – 25 spread for $1.22, 10000X.

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Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.