VXX (Short Term VIX Futures ETN) - Active in June (and July)
VXX (Short Term VIX Futures ETN) - Active in June (and July)
At the time of this post VXX (S&P 500 Short Term VIX futures ETN) was trading $27.78, down 3.7% with IV30 down 7.5% on seemingly reassured markets yesterday. A market snapshot is below.
This is a follow up to this post.
Yesterday the ETN traded over 21,000 options. All but 3,243 contracts were calls. A lot of the action was in the front month (June) OTM calls. The Stats Tab and Day’s biggest trades snapshots are included.
The Options Tab illustrates the action. June 30 calls traded over 7,000 times (mostly purchases). This volume is substantially opening (trade volume >> OI). The Jun 32/34 call spread (buy 32/sell 34) also traded a few thousand times. The OI in these lines are larger than the trade volume, I can’t tell immediately if they are opening or closing. Either way, both trades get long the short-term VIX with a week to go into expiration.
This post discussed order flow in July which bet on volatility. These bets yesterday are similar, but they are more like cheap bets with a big win if they’re right, but with a correspondingly low probability of winning.
The Skew Tab snap illustrates just how bid the upside is for these short term OTM calls. VXX hasn’t traded options very long, in fact this may be the first expiration (or second/third something small). It will be interesting to see how the skew changes (if it does) as the product gains maturity. Right now the $0.08 sale of the 34 calls against a purchase of 32 calls looks pretty nice (i.e. as of right now, they are no bid at a dime).
Finally, the Charts Tab ETN level only (6 months) is below.
You can see the big up swing, followed by another wave up, then the drop since. I get the sense that the VXX will quickly become a commonly referred to broad risk measure. It seems to be gaining traction.
This is trade analysis, not a recommendation.
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About Ophir Gottlieb
Ophir has worked as an equity option market maker and prop trader on the NYSE ARCA exchange floor since Feb. 2008. Prior to working on the exchange floor, he worked as a structurer on the Countrywide trading desk and before that as the Director of Client Services and Research for the quant modeling firm Audit Integrity. He has a Masters degree in Financial Mathematics from Stanford University. He also has an MBA in finance and an undergraduate degree in quantitative economics with an area of focus in mathematics.
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