Friday, February 23, 2007

VIX March OTM Calls

Jim Kingsland of The Kingsland Report claims he’s on vacation, but he continues to ponder the significance of the large open interest March VIX calls all the way up to the 20 strike.

From looking at the open interest patterns out through February 2009, I can only find one other area where it looks like a snake swallowed a cow: the open interest of 63,171 in April 11 puts. My (highly inexpert) guess is that someone has taken a significant long position in April 11 puts and hedged some of this in March with long calls across the 15-20 strike range. If this is the case, it is an interesting way to play the current volatility environment and suggests that a lot of money is going on the fat tails and betting against the type of orderly rise in volatility that would be associated with a mild correction in the SPX.


35 comments:

Unknown said...

thanks bill... makes sense. large open interest in the november contracts as well. i'm in richmond at a large outlet waiting for my wife as she shops at plow and hearth. back to miserable ny burbs sunday.

HPT said...

I think I would take the other side of the position and sell the puts in april and sell the calls in february.

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