A VIX put options trade worth roughly $6 million landed in the Chicago pits on Tuesday, and the traders who saw it are still trying to work out what, exactly, the buyer was after.
Around 10am Chicago time, a single market participant purchased 563 contracts of the 110-strike puts on the Cboe VIX Index expiring on 21 October, paying approximately $91 per contract for a total of $5.1 million. A separate leg followed: $1.2 million of 130-strike puts expiring on 18 November, the scheduled release date for the next set of Federal Open Market Committee minutes. Neither strike had any open interest before Tuesday.
The VIX closed the session at 17.2. Both strikes are extraordinarily far in the money, the kind of positioning that carries a high delta and implies strong conviction that the index will be materially lower by expiry. Taken at face value, the combined breakeven sits at just over $19 on the VIX.
The VIX Put Options Trade, Decoded
Nobody who spoke about the trade believed it was a standalone directional bet. The more plausible reading, offered by multiple traders, is that the position forms one leg of a larger, more complex structure.
Noel Smith, founder and chief investment officer of Convex Asset Management, framed it as a hedging problem. ‘If someone is short a bunch of the calls, they may buy the puts and the futures to mitigate risk,’ he said. ‘People buy these tiny little VIX calls for 10 cents because if they go to 20 they can say they made a hundred. But the seller of those calls, they may have something else they want, but they have this wingy risk on the book they need to manage.’
SpotGamma’s Brent Kochuba pointed to a spread trade between VIX options and the underlying futures. ‘You can own that super deep in-the-money put against a long call and long future position,’ Kochuba said. ‘As long as VIX is under 110, you can lock in whatever the difference in price is between the option and the future.’
That gap between the VIX index and VIX futures, as of Tuesday’s close, was near its widest since June. The deep-in-the-money structure may be a vehicle for harvesting that spread rather than a directional view on volatility itself.
One mechanical detail matters here. VIX Index options settle using a Special Opening Quotation calculated on the morning of expiration, not the prior day’s closing level. Anyone trading these contracts against futures is exposed to that gap at the open, not at the close, which shapes how such a spread is managed.
A Volatility Market at Odds with Itself
The unusual VIX put options trade arrives in the middle of a broader disagreement across volatility markets. Options volume on the VIX has run above average for nearly a week, climbing as the index reached just over 18 at its high last Thursday. The bond market, meanwhile, was pricing an interest-rate rise as a 90% certainty ahead of Wednesday’s Fed decision.
Yet actual price swings in the S&P 500 have stayed below 1% for five straight sessions, even with the VIX holding above 16, a level that implies a daily equity move of roughly 1%. S&P 500 options were pricing in a move of just 0.8% at Wednesday’s expiry, unusually subdued for a Fed meeting day. If realised moves and S&P options pricing are both correct, the VIX looks elevated.
That backdrop lends a certain logic to the November leg of Tuesday’s trade. By anchoring the later expiry to 18 November, the date the Federal Reserve ordinarily releases FOMC minutes (three weeks after the policy decision), the position straddles two distinct Fed information events, the rate decision itself and the release of the deliberations behind it.
That appetite for VIX exposure is not new. According to Cboe’s investor relations, average daily volume in VIX options reached over 851,000 contracts in 2024, up approximately 60% from 2022, as institutional participants have increasingly used the product to manage tail risk. Cboe has since added a separate contract, options on VIX futures, which settle differently and physically deliver the front-month future rather than cash-settling against the SOQ.
For now, Tuesday’s buyer remains anonymous, the position unexplained in full. The VIX options specification will determine exactly how and when the October leg settles. Whether the trade looks clever or costly depends almost entirely on what else sits beside it on the book, and on how the Fed sounds on Wednesday.
