VIX, ITB Options – Unusual Trading Activity – August 23, 2013
This week we’re taking a look at unusual options trading activity in CBOE Volatility Index (VIX) and iShares Dow Jones US Home Construction (ITB).
As many of you know, unusual options volume can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.
This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.
So let’s take a look at some ‘interesting’ activity that caught our eye this week:
CBOE Volatility Index (VIX)
An interesting trade occurred this week in the heavily followed volatility index, VIX.
VIX is currently trading for $14.76 per share. The current price is 34% above the 52-week low of $11.05 and 35% below the 52-week high of $22.72.
A strategist sold the September 16 straddle (both the call and the put) while simultaneously buying the September 24 calls. The entire spread traded 28,600 times for a total of $2.60 (collected by the trader). The trade is maximized if VIX closes at $16 on September expiration.
Basically, the strategist is selling the straddle because he or she doesn’t expect the VIX to move more than $2-$3 in the next month, either up or down. The call purchase is protection – just in case the VIX does explode, the losses are capped.
iShares Dow Jones US Home Construction (ITB)
A trade hit the wire this week which suggests homebuilders may still have some downside over the next couple months.
ITB, a popular homebuilder ETF, is currently trading for $21.32. The shares are up 23% from the 52-week low of $17.59 and are 18% below the 52-week high of $26.21.
This week’s trade is a put spread which traded 10,000 times in the October 17 and 21 strikes. The 21 puts were purchased while the 17 puts were sold for a total of $0.90.
This trade is maximized (for a total of $3.10 per spread) if ITB is at or below $17 on October expiration. Either someone believes homebuilders have quite a bit more downside, or it’s a very large hedge on a bullish homebuilder position.
More Options Ideas…
That wraps up this week’s unusual options trading and volume…
Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.
We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!
So keep an eye on your email inbox… we have a lot more options trading ideas coming your way!
Yours in Profit,
Gordon Lewis
Category: Unusual Options Trading Activity
