Mike Khouw Sees Unusual Options Activity In VIX

On CNBC's Options Action, Mike Khouw said that after five years of very low volatility, traders are now betting that we are going to see a period of higher volatility.

There was a trade on Thursday in VIX, which caught Khouw's attention. A trader sold 57,000 contracts of the 18/20 put spread and 57,000 contracts of the 27/25 call spread for $1.26. With this set up, called iron condor, the trader is betting that VIX is going to stay between 20 and 25. If it trades outside of the range, the trade starts losing money at $18.74 and at $26.26. Maximal loss on the trade is $0.76, while it can make a maximal profit of $1.26.