This coming week we have one more trading day left for February VIX futures and options. That means traders looking out beyond Wednesday’s AM settlement are now looking to VIX futures and options that expire in March. One such VIX option trade caught my eye Friday morning. There was a trader that sold 10,000 VIX Mar 17 Straddles for about 3.65. They were not done as they finished out the trade by purchasing 10,000 of the VIX Mar 19 Calls for 0.55 and a net credit of 3.10. I have no idea if the intent is to hold the trade until expiration, but if so, the payout below shows the potential outcomes –
The spot VIX index lost over 11% this past week based on a combination of equity market bullishness and the calendar effect of the three day weekend. Note the February futures contract closed at 14.20 which is a 0.63 premium. Expect that gap to be filled early Tuesday before Wednesday’s AM settlement.