Note:  this is the trade that was headlined on MarketWatch.com yesterday, and which I mentioned in last night's webcast.  It has FAR more risk than the story described, and I would never recommend this kind of trade due to its huge risk.  This is using yesterday's numbers. But here it is so you can see it:

Stock:  VIX trading at $15.77

Outlook:  Expecting big move over next two weeks

Reason:  Since this isn't my trade, I can't speculate as to reason, other than to say a huge pop in the VIX is expected.

VIX Daily Chart.  The grey rectangle represents the loss zone for this trade.  See more below.

Volatility:  The volatility of the VIX options is pretty high.  But with only two weeks to expiration, option volatility isn't really the concern here.

The Trade: 

• Sell to open 1 September 17 call, and
• Buy to open 8 September 27 calls,
• As a long ratio call spread
  
• For a debit of $0.02.
• Max risk = $10.02.  As traded yesterday with the ratio of selling 25,000 of the 17 calls, and buying 200,000 of the 27 calls, this trade actually risks $25 million in addition to the "debit" of $50,000.
• Break even points:  below $16.98; above $28.43;  max loss is at $27
  
• Max reward is huge and theoretically unlimited

Trade Plan:

Loss exit:  Since this isn't my trade, I don't have a loss exit.  But as a general rule, close the trade if it losses 50% of the risk.

Profit exit:  Again, not my trade.  Taking profits at 100% of the risk is a general rule.

Notes/Adjustments:  None.

Trade safe!