Trading Elections via VIX : Spreads, Options, ETF/ETNs (and not through headlines
VXX $20 puts for expiry tomorrow (fri) traded >10k contracts from the open as traders exit the 20k contracts of open interest betting on VXX > $20 that will disappear after tomorrow.
But options bets for a higher VIX began yesterday in the final hour of US cash trading session, as nearly 50k call options on $50 VIX Nov17 ‘20 traded in 2 massive clips towards the close. As a result, VIX Nov $50 Calls have taken the decisive lead as highest open interest, with >100k contracts open, 2x more vs the next highest open int. As of today so far, nearly 20k volume already traded in these Nov $50C’s. These are currently .16 delta calls (in a way, market is implying a 16% chance of VIX to be at or above 50 by Nov expiration), so no real significant dealer delta neutral hedging activity for now, but something to be conscious of- should VIX start to move ↑, it wont be a slow and steady drift (when is it ever) but a sharp +5, +10 point intraday move on VIX.
VIX options positioning currently stands at a put/call ratio of 0.84 ( < 1 = more calls vs puts positioned).
Following my notes from last 1-2 days on the short-mid VIX curve flattening may result in a sharp SPX sell off as per VIXM vs VXX, some more charts below:
VXX historically only traded below VIXM twice,... (More)