Mike Khouw Sees Unusual Options Activity In CBOE Volatility Index (VIX)

On CNBC's Options Action, Mike Khouw said that put options volume in CBOE Volatility Index (VIX) on Wednesday was 4 times higher than the average daily put options trading volume. He explained that when traders are making bearish bets on VIX, they are making bullish bets on the S&P 500. Khouw said that there was a buyer of 40,000 contracts of the January 20th weekly, 16 strike puts in VIX for $0.10 on Wednesday. The break even for the trade is at 15.90. He added that when the VIX is trading above 25 it is oversold and it is usually a good time to buy stocks then. It is not too late for investors to buy protection, thinks Khouw. He suggested that they can exploit elevated premiums by selling call options against a long position and they could also buy put spreads.