In a day of stock market turmoil, a bet on calmer waters ahead
The VIX spiked up to 31 at one point today:
as the stock markets gave up the remainder of their calendar year 2011 gains:
I used this period of turmoil — much of it seemingly rooted in Japan’s nuclear problems following Friday’s earthquake — as the time to switch course yet again, and bet on calmer times ahead, and a drop in the VIX with a put spread.
Specifically, I bought 10 VIX April 25 puts for $3.20 each, and sold 10 VIX April 22.50 puts for $1.65 each. My total cost was $1550, and this bet will pay off best when and if the VIX drops to 22 1/2 before mid-April.
At the time I put the spread on, VIX was 28.62.
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