The SPX has seen unusually high activity in the December 2010 1075 puts over the past two days. Yesterday near the close of the trading day, 18,000 contracts were lifted in these puts. Today another 16,000 are on the tape with over 200 million in premium spent, buying about 20 million dollars in VEGA exposure. VEGA is the dollar sensitivity due to a 1 point change in the implied volatility level.
This trading also created over 1 billion dollars worth of delta to sell, which to me is the most incredible part of this activity. The futures market was able to buy the amount of deltas needed to be sold to hedge this trade without a material decline in the overall market. This trading is likely coming from an institutional portfolio manager looking to hedge his downside exposure to a long stock portfolio.
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Tags: SPX
