Interesting day today. I'll look at the actual VIX futures curve chart next and a video from the OptionMonster volatility sonar report on a DEC/JAN 1x2 put transaction in the VIX futures. $VXX is the iPath S&P 500 VIX Short-Term Futures ETN or the first 2 months of the VIX futures curve, which rolls month-to-month. So $VXX is exposed to the curve widening or flattening as the contracts are bought and sold month-to-month. This post is specifically on the out-of-the-money option activity I just saw in the VXX December 19 Call. VXX is currently trading at $16.87. You can watch it stream live on my quote widget.
Crimsonmind.com said today that 35,000 traded at $1.35 between the bid/$1.30 and ask/$1.40. The new open interest, whether long or short, expires on December 17, 2010.
The trade was either hedging or speculating on a steep market fall through the end of the year with the near-term VIX curve flattening. Or the out-of-the-money calls were sold short betting on capped volatility through Q4 and the elections. I'm watching QQQQ here as it tests the 2010 high and a *flattish* downtrend from the 2007 peak. I'm with others that believe tech continues to lead the market (watch $aapl and $swks, $qqqq).
VXX DEC 2010 $19 Call