Giant VIX options block-trades

Discussion in 'Trading' started by Dmitrij_111, Apr 9, 2021.

  1. Somebody shook up options screens Thursday morning with a wager that the VIX Index will rise toward 40 -- and won’t be lower than 25 -- in July, up from about the 17 level where the volatility gauge currently trades. The trader appears to have made several block trades, buying a total of about 200,000 call contracts. That’s almost as big as the total daily volume of VIX calls, based on the 20-day average, data compiled by Bloomberg show.

    The trader likely made the purchase through several tranches, first buying 100,000 contracts in two block trades, then coming back for 100,000 more. They paid $3.40 for calls at 25 and received $1.30 for selling 40 calls.

    Are we about to see increased volatility after June FOMC? Thoughts, guys?
     
    comagnum and Nobert like this.
  2. destriero

    destriero

    Laying off an OTC position in listed.
     
    ITM_Latino and .sigma like this.
  3. ET180

    ET180

    Or they just want to hedge their long exposure. Based on the moves in the indexes and VIX, makes more sense to hedge now than it did last Friday.
     
    Trade Prophet likes this.
  4. Please explain
     
  5. because of low volume and volatility hence hedge became cheaper?
     
  6. destriero

    destriero

    Large buy side trades OTC -> bank lays off risk in listed.
     
    ITM_Latino likes this.
  7. ensemble

    ensemble

    I wouldn't read too much into it in terms of a directional trade. Going back to 2017, large VIX opening trades have expired worthless 90% of the time.
     
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  8. Arnie

    Arnie

    why would they do that with VIX? Why not options on the stocks?
     
    .sigma likes this.
  9. S2007S

    S2007S

    Market is way too complacent, if you have huge long positions buying some vix calls would be a great idea.


    This always happens after the vix drops and drops and drops. Then out of no where it skyrockets to 25+ and eventually 40+ if fear lasts longer than a week. Of course people will only wish to buy vix calls after the fact the market has fallen, so buying in now might not be such a bad idea.
     
    comagnum, ET180 and Trade Prophet like this.
  10. ET180

    ET180

    Based on technical, stocks became more overbought. Meanwhile the cost of insurance dropped relative to last week. So it makes more sense to buy protection or hedge now than it did last week.
     
    #10     Apr 9, 2021