Tuesday, June 22, 2010

VXZ (VIX Mid-Term Futures) - Professional Betting on Market Downturn

VXZ (VIX Mid-Term Futures ETN) is trading 84.06. The LIVEVOL™ Pro Summary is below.

The ETN has traded exactly 20,000 options on total daily average option volume of just 472. All the contracts went up in a six legged put spread in July (zero calls have traded). The Stats Tab and Day's biggest trades snapshots are included (click either image to enlarge).

The Options Tab (click to enlarge) illustrates which lines are trading. Note three of the lines are substantially opening (trade size >> OI). The 81, 85 and 89 puts are ambiguous (trade size = OI).

The 81/85/89 butterfly traded on 6-8-2010 (a bet that vol drops). I wrote about it in detail. VIX Mid-Term Futures (VXZ) - Butterly Bets on Vol Drop. Click the title to read it.

If we take the trades today together, I see this:
Buy 2,500 July 75 puts for $0.55
Buy 5000 July 77 puts for $1.00
Buy 2,500 July 80 puts for $2.05
Sell 2,500 July 81 puts @ $2.30
Sell 5,000 July 85 puts @ $4.30
Sell 2,500 July 89 puts @ $7.30

The position is easier to see in a PnL chart (at expo). Click to enlarge.

Basically, it's a fancy shmancy call spread purchase (put spread sale). Max loss is $2,250,00 and max gain is $5,500,000. A bet on the VXZ going up, is a bet that the market goes down.

The Skew Tab snap (click to enlarge) illustrates the vol by month by strike. You can see, it looks like a normal skew for this security.

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

We can see the dip, then the rise and the recent "mid point drop." It looks like there is just the beginnings of a turn upward. Could be a blip, or could not...

This is trade analysis, not a recommendation.

Legal Stuff:


  1. Great analysis as always, keep it up !

    Daniele, London UK

  2. Ophir, why this stock is better for trading than vix options?

  3. I believe you can trade the underlying in this, unlike the VIX unless you trade the futures.