After VIX options saw a record-breaking day on Tuesday as the VIX jumped 7.71 percent, thanks to declining concerns for Cyprus, the VIX has gone south on Wednesday.?
With less than an hour of trading left in the day, the VIX is down almost 14 percent to 12.41. Earlier, one trader jumped on the decline and bought 116,000 April 17/27?call?spreads for $0.70. This included the April VIX future at 14.80 with the spot index at 12.90, according to CNBC.
The trade also came as the March VIX future expired on Wednesday morning.
Over at Barron’s, Brendan Conway noted that along with the VIX’s fall, volatility ETFs followed suit as?Barclays iPath S&P 500 Short-term VIX Futures ETN?(VXX) was off 3.7 %; ?ProShares Ultra VIX Short-Term Futures ETF?(UVXY) was down 7.5%. and ?VelocityShares Daily 2x VIX Short Term ETN?(TVIX) fell 5%.
He also cites a blog post by Bill Luby over at VIX and More who writes about the recent increase in VIX options activity:
“Truth be told, VIX options seem to be attracting the attention of a new group of investors. In fact, during the?CBOE Risk Management Conference?earlier this month, there was a great deal of speculation surrounding who some of the new players in the VIX space might be that are responsible for the new growth in?VIX futures?and VIX options that appears to be independent of the volume driven by?VIX ETPs.??[Hedge funds, proprietary trading firms, commodity trading pools/advisors, insurance companies, bond traders, FX traders and others were among the names that were bandied about?]”
Luby then comments on Tuesday’s record activity which he didn’t get too excited about:
“Investors are always looking for an interpretive overlay for these VIX options transactions. Frankly, on the day before the March VIX expiration, a great deal of the options activity is the result of large investors closing out March positions or attempting to game the special opening quotation (VIX SOQ) from tomorrow?s open that establishes the settlement price for VIX options and futures.? As a result of that low signal to noise ratio, the day prior to expiration is generally not a productive time for reading options entrails, though there will no doubt be some who are hell-bent on some sort of options divination regardless of where we are in the VIX expiration cycle.”
What do you think is next for the VIX and its products?