By Kaitlyn Kiernan
One investor’s “strangle swap” hedged a big bet in VIX futures — and had the trading pit buzzing about the most interesting options play in weeks.
The trader made waves with a supersize wager that banks on the market will keep calm for at least the next six weeks. It foresees more-volatile moves after that and aims to protect from those swings.
“It is unusual to see people doing strangles across multiple months like this,” said Mark Longo, CEO of TheOptionsInsiders.com’s Longo. “It becomes very difficult to manage.”
It was the bet’s size and complexity that had fellow market participants shaking their heads — or scratching them.
The position cost about $30.1 million to put in place. Each option is tied to 100 shares of the VIX — the Chicago Board Options Exchange gauge of stock volatility — so the bet likely protects a far-larger futures investment.
“It’s enormous,” said Caitlin Duffy, an options analyst at Interactive Brokers.