Bloomberg writes that on Tuesday, an investor paid about $7.95 million for a call spread: purchasing 150,000 bullish contracts on the May 22 VIX while selling 150,000 May 30 calls. This will pay off if the VIX rallies by at least 60 percent by May (above 22.53 from the current 14 level, according to Bloomberg data) with a maximum return coming if the VIX more than doubles to 30.
Lillian Seidman, an options strategist at Miller Tabak, said to Bloomberg, ?It was one of the largest VIX trades we?ve seen in a while and an interesting way to put on a tail-risk hedge. This is a play on the VIX shooting through its high not seen for the last couple of years.?
Between Monday and Tuesday: the VIX fell about 19 percent?its largest slide in more than a month. It’s been hard to say whether it’s the?Ukraine or?China?s?crisis driving this or maybe some other factor that has joined the party.?
Other volatility products taking a hit this week, reported Barron’s Brendan Conway, through Tuesday has included?ProShares Ultra VIX Short- Term Futures?exchange-traded fund (UVXY) down around 16% since Friday?s close as well as Barclays?iPath S&P 500 VIX Short-Term Futures ETN?(VXX) off 9% and VelocityShares Daily 2x VIX Short Term ETN?(TVIX)?down 15%.
On Wednesday, the markets awaited word from the FOMC meeting, which announced it would cut monthly asset bond purchasing by an additional $10 billion to $55 billion a month. Federal Reserve chairman Janet Yellen had the question posed to her on how once tapering stops, how long before the Fed would increase interest rates?
She responded via MarketWatch, ?So the language that we used in the statement is ?considerable period.? So I, you know, this is the kind of term it?s hard to define. But, you know, probably means something on the order of around six months, that type of thing.?
So if you’re wondering where the VIX ended on this third day of the week, it was at 15.12, up 4.13 percent.?