Large Traders Betting on Lower VIX (VIX, SPY)

The CBOE Volatility Index

is off of its highs today, currently registering at 26.98; this is off the high of 28.77, which we saw earlier in the session. Note that the VIX has been rallying for the past three weeks, off of a low of 21.72. The VIX futures have also been increasing in value as large, institutional buyers positioned for a market drop. Today, however, following the existing home sales data release, the S&P 500

has seen a snap-back rally, forcing the VIX lower. Several large traders are betting that the index (and thus the futures) runs lower from here, which would coincide with a SPY rally. In one trade, the September $27.50/25.00 1x2 put spread was purchased for $0.425. The $27.50 put was purchased 10,000 times and the $25.00 puts were sold 20,000 times. While this is not a naked long premium trade, this is typical with VIX put buying due to the structure of the actual VIX. In another trade, the October $24/22/21 put tree was purchased 1,400 times. This trade is similar to a 1x2 except the second short put is at a different strike. This trade is slightly more bearish on the VIX than the above due to its max gain. This action is echoing that we are at a short-term bottom, perhaps we can continue to rally off the lows this week. For more great research like this, as well as how to play it through options…please visit

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