This Week in VXST – 5/9/2014

VXST made a nice round trip last week working higher and then landing slightly lower than last Friday’s closing price. I would like to highlight the price action on 5/6 or Tuesday last week where VXST opened fairly strong, faded and then closed higher on the day and higher than the opening price. This was also the last trading day for May 7th VXST futures and options. We ended up seeing a good amount of activity in the VXST May 7th 13 Calls with 2000 contracts trading on the day. I know from an email I received that all this activity was not just one person. I also was told that at least one trade bought the calls at a low price and sold high (like we are taught to trade – buy low – sell high) for a nice day trade. I’ll be paying a little more attention to the at-the-money May 14th calls this Tuesday to see if the same (or even more) traders show up to trade the last few hours before expiration of those options.

VXST Chart

The curve remains steep, but a little less so than last week. What continues to stand out to me is the elevated level for the May 28th futures. Now that we have Jun 4th contracts trading (note the blue line below) the heighted level for the May 28th VXST futures relative to the other active contracts definitely is worth investigating. I checked the economic calendar and the only thing that remotely stood out was FOMC minutes coming out the afternoon of May 21st any ideas about this activity are welcome.

VXST Curve


Finally, in the option space the biggest open interest shows up in the VXST May 14th 15 Calls at over 500. Since things were slow on Friday afternoon I visited the VIX pit to get some color on that trade and the indication is that the positions were opened as shorts. With VXST closing at 11.17 and the May 14th future at 12.30 that seller probably feels pretty good about the trade this weekend, but as we have already seen an unexpected quick move up in VXST is always possible.