VIX Options Haven't Been This Popular Since 2015

VIX put open interest is at its highest point since 2015, while call options are nearing February's record high

Mar 16, 2017 at 11:44 AM
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While the CBOE Volatility Index (VIX) has been relatively quiet in recent months, VIX options traders have not. The stock market's "fear gauge" has spent 2017 mostly dancing between 11 and 13, and neither yesterday's Fed decision nor the Dow's triple-digit drop a couple weeks ago could push the VIX out of its range, sending up a rare signal. However, traders have been accumulating VIX options at a rapid-fire rate, either to bet on or hedge against a volatility spike.

cboe volatility index (VIX) daily chart


VIX put open interest is at its highest point since October 2015, with 3.2 million contracts outstanding. Meanwhile, VIX call open interest is in the 99th percentile of its annual range, and is on the cusp of taking out February's record of 8.4 million VIX calls opened. As of yesterday's close, 8.2 million VIX calls were open.

 

VIX option open interest
Chart courtesy of Trade-Alert


The 12 strike is most popular among VIX put holders, with about 307,000 and 264,000 contracts docked at the March and April 12 puts, respectively. However, six of the 10 most populated VIX strikes are out-of-the-money March calls, including the top three. Most notably, the deep out-of-the-money March 18 and March 17 calls are the most populated strikes of any series, home to about 367,000 and 340,000 contracts, respectively. Taking the "bronze," so to speak, is the March 16 call, with nearly 317,000 contracts in residence.

As Schaeffer's V.P. of Research Todd Salamone noted in this week's Monday Morning Outlook, "To the extent that some of this call open interest represents hedges to the enormous VIX futures net short position among large speculators (as noted in the weekly Commitments of Traders report), the risk of a volatility pop is dampened a bit, as this is a group that will not panic if appropriately hedged." However, as he's stated before, "it's just after a boatload of VIX calls expire that a risk of a volatility pop increases," and the aforementioned front-month VIX calls expire less than a week from today, on Wednesday, March 22.


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