Traders double their money in $VXX

Toay’s downside market volatility resulted in fast profits for option traders who opened upside positions in the iPath S&P 500 VIX Short-Term Futures Note (VXX) only 24 hours ago.

Yesterday afternoon, Apr. 30, our Unusual Activity Service flagged the purchase of 14,000 Weekly $41 calls, expiring today, for $0.46 as part of a bullish spread with shares at $38.96. This was clearly a new position, as volume was far above the strike’s open interest of 2,724 contracts at the beginning of that session.

Those calls traded for $1.17 today, more than double their purchase price. The stock rose 7.85% in the same time frame, a large move but nowhere near that of their options.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

VXX surged to $42.07 as the market digested the week’s latest earnings results from Amazon (AMZN) and Apple (AAPL) but has since pulled back to $41.46, still 9.48% higher on the session. The exchange-traded note, which reflects volatility in the S&P 500, usually trades inversely to stocks.