From Trade Alert - interesting spike in Spikes

Discussion in 'Options' started by ETJ, Jul 20, 2019.

  1. ETJ

    ETJ

    More on Yesterday's SPIKES Options Trade
    [​IMG]****SD: Above is a chart of yesterday's most active index options. Trade Alert's Henry Schwartz provided this background on the SPIKES ratio call spread trader:

    After a brief climb to 14.40 yesterday, the SPIKES index was near 13.30 in the afternoon with 30K contracts trading in a single four-way spread at 11:19 a.m. ET, when the index was near 14.07. The package involved 1x2 call spreads in August and September terms, likely rolling what remains of the August 1x2 call spread bought 5k x 10k last month into a similar structure in September. Data shows the trader bought 5K Aug 18 calls for $1 to sell 10K Aug 26 calls at 20c (likely closing) and sold 5K Sep 17 calls for $1.95 to buy 10K Sep 25 calls for 62c. The September spread nets a $350K credit, while the unwind in August for a net 60c debit appears to be take a dime loss based on the entry levels of $2 vs 75c on June 12th when the index (and August synthetic future) was about 1 point higher. (Lightly edited for clarity.)

    At some point later in the day another 10 contracts traded, bringing the total volume on 7/18 to 30,010 SPIKES options contracts. It's a notable day for SPIKES as that is some 9% of the day's VIX options volume.

    Global Investor Group's James Thursfield recently reported that the OCC offers risk offsets between VIX and SPIKES.
     
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