vix mark up

[FSU]

VIX and broad market SPX and SPY option volume so far today is very tame, or normal/average.
https://www.barchart.com/options/most-active/indices?viewName=main

Only 400,000 and 800,000 and 2,000,000, VIX and SPX and SPY option volume.
...I've seen other days where the volume so far is easily double or triple or even quadruple that.

Like I said, nothing to write home about. -- If you will easily get this excited for every news story in financial markets daily...you will have your head spinning. and blood pressure up. and trading account blown-up.
Hoo-Ah`

I think your missing the point of the post. This had nothing to do with total volume today. It had everything to do with opening orders in the May SPX options. There were between 5,000 and 13,000 lots of essentially market orders to buy of out of the money puts. I haven't seen this size of opening orders before as long as I can remember. This has a huge effect on the settlement price of the VIX and creates opportunity for customers to participate in the SPX opening process.

The news stories spin this as VIX manipulation, but I don't think that's the case. The CBOE is very transparent on how the VIX is marked (based on the opening price of these SPX options). Anyone who thinks the price is too high, is free to sell them.

 

[Robert Morse]

I think your missing the point of the post. This had nothing to do with total volume today. It had everything to do with opening orders in the May SPX options. There were between 5,000 and 13,000 lots of essentially market orders to buy of out of the money puts. I haven't seen this size of opening orders before as long as I can remember. This has a huge effect on the settlement price of the VIX and creates opportunity for customers to participate in the SPX opening process.

The news stories spin this as VIX manipulation, but I don't think that's the case. The CBOE is very transparent on how the VIX is marked (based on the opening price of these SPX options). Anyone who thinks the price is too high, is free to sell them.

It was a great catch and a great opportunity to make quick money on a day trade. Maybe next time you should not share.

 

[JackRab]

Hone your skills and strategy to be an option buyer, instead of seller -- that's where the true potential money loot lays in the market.
It's heck of alot risker though, but also can be equally if not more rewarding.

Not on a VIX markup... that stuff will come down

I don't think you understand VIX expiration...

 

[JackRab]

What happens to you if the underlying takes a multi-sigma move to the downside?

Not in SPX on VIX expiration... you need to understand the dynamics. On VIX expiration date, some traders who are long VIX in the derivatives that are expiring want to push the VIX higher. VIX expiry level is determined with the opening of SPX options. So usually VIX is 'manipulated' done by massively bidding up far OTM (puts) in the next SPX options... since the IV jump from a 5 cents options to a 30 cents one is a lot... so that's very effective.

Cost of doing this is limited... well... limited it will add up But if you're long a few thousand VIX April futures, and long the 16 strike ... boom...

It's also possible that two or more parties collude... one bids up those puts and another one sells them, then the next day or asap they reverse the trade OTC. That would be illegal though, since it's market manipulation... but it's hard to track the OTC trade I guess...