This week, the options trade of the week covers a big trade in the short-term volatility ETF. A trader placed a bearish put ratio spread in iPath S&P 500 VIX Short-Term Futures ETN (VXX), a popular method for trading short-term volatility, which is based on VIX futures contracts. A put ratio was executed with VXX at $17.60 and involved buying the December 20th 16 put while selling double of the 15 put.
The point of this trade is to have downside exposure without spending a lot on premium. It’s generally done by professionals who can handle the downside risk of having a double-short option. For casual traders, doing a simple put spread is the way to go if you believe short-term volatility is going to keep dropping through the remainder of the year.