Options Flow Summary: VIX & OXY
CBOE Volatility Index (VIX)
This indicator of short-term implied volatility has eased substantially from the multi-year peaks seen yesterday. The current level is close to 22.4 and most of the options flow is being initiated by call sellers. This is the first time that sellers have dominated since last weekís implied volatility surge. 47,000 August 25 calls have traded thus far, with sellers receiving $1.30 for much of the volume.
Before yesterdayís late rally, we saw impressive VIX peaks above 26. This indicates an explosion of short-term market concern. Buyers are paying as much as $1.65 per option, with a total of 53,000 of these calls trading and 27,000 contracts worth of open interest being created.
Occidental Petroleum Corporation (OXY)
A large straddle in OXY options traded on the ISE just after noon today. A buyer paid $17 for 10,000 January 2009 50 straddles. The stock is trading near $56 and the total premium paid for this position is an impressive $17 million. Theta (time decay) on this position is a mind-boggling $25,000 per day. That's definitely something for all of you premium buyers to keep in mind.
This buyer is apparently looking for continued increases in market implied volatility. In order to scalp enough gamma to break even on his decay, he'll need daily moves of nearly 2% in the underlying.
View Henry Schwartz's post archive >