This Week in VIX – 12/27/2013

New highs for the S&P 500 again this past week still did not push VIX to new 2013 lows.  There was a little excitement on Thursday as VIX had an 11 handle for a little while before recovering in the afternoon.  With VIX at such low levels it is very hard to associate a move up in VIX during the day while the S&P 500 is preparing to close on another all-time high with some sort of signal that the market is topping out.  VIX closed at 11.30 on both March 14th and 15th this year which counts as a post-2008 low and the low for 2013.  Since March 15th the S&P 500 has done pretty well, rising just over 280 points or about 18% as of Friday’s close.

Despite the quiet week, a VIX option trade on Thursday is worth noting.  About 40,000 VIX Jan 15 Calls were purchased at 0.38 and 40,000 VIX Feb 30 Calls were sold for 0.18 and a net cost of 0.20.  It’s rare to see selling of a farther dated call option to pay for a near dated one, but that seems to be what happened in this instance.  I did some quick digging and the last time VIX closed over 30.00 was over 2 years ago.  Maybe selling the Feb 30 Calls is based on how long it has been since VIX had a 30 handle.