Large VIX Trade

I am seeing a large straddle trade this morning in the CBOE Volatility Index (CBOE: VIX) options. The March $20 straddle was sold 25,000 times for $2.50 just moments ago. This trade looks to be a continuation of the trade that occurred on the $22.50 line on Friday. These plays are actually on the volatility on the VIX (i.e. volatility of the volatility), with the belief that VIX premiums will come in over the next few weeks.

This trade in the CBOE Volatility Index will profit if the movement of the S&P 500 subsides and smaller movements replace large swings in the index. Today’s trader is looking for the spot VIX to remain between $22.50 and $17.50 at expiration.