This was a blog from a professional options trader on the CBOE website. He watches for big money flows… this time he saw one in VIX call options.
‘Is the VIX Expecting More Upside in April?’ by Andrew Keene
by mkearney on 01-30-2013 12:37 PM — last edited on 01-30-2013 03:28 PM
A broker in the CBOE’s Vix Pit bought 5,000 April 17 Calls for $1.725 and possible more Upside in the Vix in the future. The broker represents an order from a hedge fund, mutual fund, retail bank, or big trader. Lets give a little breakdown of the trade.
Trade: Bought 5000 April 17 Calls for $1.725
Risk: $172.50 per 1 lot
Reward: Unlimited
Breakeven: $18.725
Cash Outlay: $862,500
While the cash VIX was near 13.91, the April VIX Future was at 16.10, up 0.10 on the day. The 17 strike call is out-of-the-money, but maybe not that far.
Since this blog was posted, the VIX has moved up. Our previous post discussed how to take advantage of this situation, its still not too late.