VXX Bearish Put Butterfly Trade

It looks like the problems with Greece and “Grexit” may be behind us. Volatility of the market is still overall a little bit high.

An interesting play here would be for a further pullback in the VIX. Already, after comments coming from Greek leaders, it appears they will be willing to except their creditors terms or most of them.

With the holiday weekend coming and of course summer normally having a lower volume, volatility could see a short-term pullback.

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The ETF, VXX is a very liquid an easy way to play options in market volatility. The strategy I like here is the bearish put butterfly in the VXX.

While a trader could structure the trade in different ways, one way would be to use the July 17th expiration for all the legs of the trade. Buy one July 21 put, sell two of the July 18 puts and buy one of the July 15 puts.

Trade Profit

With the VXX trading currently just above the $119 level, the trade would profit either from the VXX staying here in price or a further drop in price.

The butterfly currently would cost around $1.40 per contract. This would give you a range the VXX could trade in that you could be profitable with between now and the July 17 expiration.

Paper Trade

As always, paper trade this if you don’t fully understand the risk involved.

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3 replies
  1. George
    George says:

    Do you like to trade the broken wing butterfly? if we are very confident we could use it in this case as well.


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