Penny VIX Options Signal Extreme Bearish Attitude

Hey Traders,


With the VIX sub-20 for the first time in almost a year on Friday,  I came into Monday expecting bearish trading.


However, there is a trader who is AGGRESSIVELY trading March to drop.


What is interesting is that he or she is doing it in size, using penny options.


So far on the da,  traders have exchanged over 100,000 of the March 18 puts, with customers buying them for .10



This is against open interest of 50,000 contracts …


That means the customer initiating this trade is almost certainly opening.


I am also seeing activity in puts in April and some in Feb (into tomorrow AM’s expiration).


Less than an hour into the session (as I am writing this),  we have traded over 155,000 puts,  most of which are these March 18s.


So what does this mean? ? Are we definitely going to see the VIX tank?


No.


But the fact that a customer is taking up a SIZE position on an option that costs less than .10 tells me this customer is looking for volatility to fall …


More importantly, mama or papa bear thinks that March future is due for a beating (which is the real underlying for VIX March options).


I think a short March play makes a lot of sense and for.10,  the March 18s are pretty cheap.


Do I think there are better approaches? Probably, but …


The trader spent a million dollars in total on this bet, if the VIX can get to even 17.5 or 17 the trader is going to clean up.


The Option Pit VIX Light Is Red, and Volatility Is Likely to Fall

Your Only Option

Mark Sebastian

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