Cboe VIX index sees $6M unusual put trade ahead of Fed rate decision

Someone just dropped $6 million on a single VIX options trade, and the timing is anything but accidental. The largest trade on the Cboe VIX Index on Tuesday was a purchase of deep, deep in-the-money puts, a move that stands out even by the standards of institutional volatility desks. The trade landed exactly one day before the Federal Reserve’s FOMC rate decision on September 16, when futures markets are pricing in an 80-90% probability of a 25-basis-point rate hike. What a $6M VIX put actually means The VIX, often called Wall Street’s “fear gauge,” measures expected 30-day volatility of the S&P 500 based on options pricing. When it goes up, markets are nervous. When it goes down, traders are relatively calm. Buying puts on the VIX is essentially a bet that fear itself will decline. But these weren’t ordinary puts. They were deep in-the-money, meaning the strike prices were set well above where the VIX was actually trading. Deep in-the-money puts carry high intrinsic value and behave more like a direct short position on the underlying index. They’re less sensitive to time decay and implied volatility shifts than at-the-money or out-of-the-money options. The VIX had been trading...