Thursday, June 3, 2010

VXX (Short Term VIX Futures) - Bets on Volatile July

VXX (VIX Short-term futures ETN) is trading 28.77. The LIVEVOL™ Pro Summary is below.

The index has traded nearly 29,000 options on total daily average option volume of just 1,101. All but 4,216 contracts have been calls. The largest trades are the July 25,30,32,36 and 39 calls. The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates that the calls on all the lines are mostly opening (compare OI to trade size).

From what I can tell these are the trades:

Buy Jul 30 calls
Buy Jul 32 calls/Sell Jul 39 calls (call spread)
Sell Jul 36 calls
I can't really tell what's going on with the Jul 25 calls

If you put those together (sans Jul 25), you get two call spread purchases (long the VIX short-term) into the summer doldrums. i.e. a bet that it will not be "doldrummy." I know that's not a word, but it should be...

The Skew Tab snap (click to enlarge) illustrates a relatively normal skew for a vol index. We can see Jun upside (or a stock market downturn) is bid relative to the next two months. July and Sep are very similar, which is in fact weird.

The VIX itself has the same pattern though. Jun is bid relative to the back two months with Jul > Sep. I've included the VIX skew as well (click to enlarge).

Finally, the Charts Tab (6 months, index only) is below (click to enlarge).

This is a pretty cool chart actually. You can see the short futures dip then jump from the European woes. Now they are drifting down again.

I have always felt that 45 VIX (where we peaked recently) is sort of an unsustainable level. It means we're on the "verge" of being on the "verge" if that makes sense.

From there the market either tanks more and VIX pops higher, or it does what has happened recently. No explosive news, so a drift down (by drift I mean 33% re-tracement in 4 weeks).

This is trade analysis, not a recommendation.

Legal Stuff:


  1. seems like your average daily volume number for vxx options is off. They've only been listed for a week and every day has volume above 10,000 contracts

  2. You could be right. We may be counting "0" for the empty days.

  3. I like your emails there good... U guy trade anything I can folow u guys or it's only emails?