A “Texas Bull Spread” in the VIX

I know what you’re thinking – a “Texas Spread” is a new term. Not really. Think of it this way – in Texas they do everything BIG.

Late this morning I was escorting a group of grad students from the U of Denver around the CBOE floor. While in the VIX pit a broker asked for a market on a spread. Normally the marketmakers would reply with their bid and ask immediately, but the broker had the marketmakers looking for pencils and paper (or their ipads). He had to repeat it once for a few of the traders. Here was the spread he quoted which traded after I left the floor:

A customer bought 45,288 VIX January 25 calls

sold 45,288 VIX January 30 calls

and

bought 35,742 VIX March 24 calls

sold 35,742 VIX December 24 calls   

and

sold 45,288 VIX January 14 puts

Coming in this morning;

December VIX futures 15.55

January VIX futures 17.15

March VIX futures 19.30

So this customer combined a bullish call vertical spread (Jan 25 – 30), a bullish out-of-the-money call time spread (Mar – Dec 24 spread) and a bullish sale of puts (Jan 14). 

Yup pardner, I’d call this a Texas Spread.

Marty (How ’bout them Cowboys) Kearney