Interesting Order in VIX Options

One of the bigger trades to come from the CBOE’s VIX Pit today was Paper (professional) buying
20,000 Jan 17 Puts for $.40 when the VIX was trading 20.40 (and VIX Jan futures near 20.32)

Breakdown of the Trade:
Risk: $40 per 1 lot
potential Reward: $1660 per 1 lot (with VIX at zero)
Total Capital Outlay: $800,000
Breakeven: $16.60

When puts are being purchased they are either Protection against a
long position or Speculation to the Downside. In this case I think
the trader thinks the VIX can sell back off to a level below 17 by January expiration and are
setting themselves up for a great risk vs. reward payout. For example, a settlement at 15.00 in January would produce a profit of $3.2 million.


Andrew Keene