VIX Options Trader Braces for a December Volatility Spike

The CBOE Volatility Index hasn't printed above 20 since Nov. 9

Oct 4, 2017 at 2:56 PM
facebook X logo linkedin

Even with the U.S. stock market carving out record highs in today's trading, the CBOE Volatility Index (VIX) is up 1.8% at 9.68, on track for its second straight day of gains. While this upside should be taken with a grain of salt considering the market's "fear gauge" is lingering in single-digit territory -- and near historically low levels -- call volume on the volatility is running at a slightly accelerated clip today.

At last check, more than 457,000 calls had traded on VIX -- about 1.1 times what's typically seen at this point in the session -- compared to around 77,000 puts. Most of the action has centered at the December 16 call, where Trade-Alert highlights a 79,000-contract block that was possibly bought to open for an initial cash outlay of about $10.42 million (number of contracts * $1.32 net debit * 100 shares per contract).

While this options trade could represent a speculator who is growing more bullish in their volatility bets, VIX hasn't printed north of 20 since Nov. 9 -- the day after the U.S. presidential election. As such, it's likely this big options bet is a result of a traders hedging against an end-of-year volatility spike.

Supporting this theory is the latest Commitments of Traders (CoT) report, which showed a massive net short position on VIX futures. In fact, large speculators increased their net short position on VIX futures for a fifth straight week -- to the largest short position ever, going by the number of contracts.

Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI