The first day for VXST option trading is history and what a day it was in the equity markets with the S&P 500 losing just over 2% and the NASDAQ-100 dropping over 3%. Operationally trading in the new VXST option market was smooth as any established market despite the extra equity market volatility. Just before the close I spoke to some traders in the VIX pit and I was a little disappointed to hear that none of the trades today appeared to be spread trades. I do believe in time some very clever volatility traders will find methods of combining various VXST options (or even VXST and VIX together) to come up with their desired exposure to market volatility. The day over day activity in VXST and the current futures contracts appears below –
Note VXST rose about 30% and the front week April 16th VXST Future was up over 20%. Any time we have seen a rise in equity market volatility over the past couple of years the result has been a quick drop back to lower levels. The 0.75 discount for the near dated VXST future relative to the index can be taken as the volatility market expecting some sort of drop in the index as well.
On a final note, the biggest VXST option trade was a purchase of just over 2,000 of the VXST Apr 16th 16 Calls for 0.30. This trade actually went off pretty early in the day when VXST was at much lower levels. Whoever was behind this trade is probably pretty happy with VXST options as the bid price on this option was 0.95 on the close today. Not so bad for a first VXST trade.