Last week as expiration approached for the May 7th futures and options based on VXST there was some activity that occurred on the Tuesday before expiration in the VXST May 7th 13 Calls. Paper was buying and selling those contracts as the underlying index and futures climbed over the 13.00 price level the day before expiration.
It appears that short term volatility traders were in the market again today with both bearish and bullish trades in VXST options occurring this morning. To give some color to each specific trade I put together the chart below. This figure shows a 5 minute price chart of the S&P 500, May 14th VXST Futures, and VXST Index along with 3 points highlighting where a few trades in May 14th call options occurred.
Number 1 shows where there appears to be a seller of 60 of the VXST May 14th 14.00 Calls at 0.10. This trade was executed around 9:20 Chicago time and is taking in a little premium and probably is an outlook that VXST remains under 14.00 into Wednesday morning.
Number 2 is a more bullish outlook for VXST where there was a buyer of 40 of the VXST May 14th 12.50 Calls that paid 0.15 for these options. If held to expiration these calls will result in a profit if VXST settles at 12.65 or higher.
Number 3 goes back to the bearish side and is another sale of the VXST May 14th 14.00 Calls at 0.05. As with trade number 1 this trade works out if VXST is under 14.00 at expiration when settlement is determined on the open Wednesday morning.
None of these trades were marked as spread trades on the tape, but it is always possible that either trade, selling the VXST May 14th 14.00 Calls or buying the VXST May 14th 12.50 Calls, was tied to so other trade or position. The complementary positions could be VXST futures or even short dated SPX options. However, what can be gleaned from this activity is that some traders are finding short term opportunities using VXST options, even when those contracts have just a day or two left to expiration. Tomorrow we’ll see if more traders show up with an outlook toward Wednesday’s VXST settlement price.