This Week in VIX – 5/16/2014

VIX experienced one of those short lived spikes (I may be being generous with that word) that have become the norm. I’m referring to the price action on Thursday last week which is the only green bar on the chart below. On second thought I’m pretty certain that spike is too generous since the high on Thursday was lower than on the previous Friday. Maybe the better term would be ‘upward blip’.

VIX PA

With only two trading days remaining until expiration the May VIX future went out at a 0.81 premium to the spot index. I assume this is a weekend fear premium and studying the last weekend premium is on the extended list for my summer intern that starts on Monday. Also, Monday morning we’ll see if that premium shrinks quickly depending on how the S&P 500 and spot VIX begin the day.

VIX

Finally, Steven Sears kind of stole my thunder in the Striking Price column in Barron’s this weekend. He notes that a couple of derivative strategists are suggesting taking advantage of the low level of VIX to shop around for cheap VIX calls. One trade he points out involves buying VIX Jun 15 Calls and selling VIX Jun 20 Calls. Also, on Monday there was a buyer of 40,000 of the VIX Jun 18 Calls that paid between 0.60 and 0.64 cents per option.

Finally, here’s an interesting perspective on what it would take to get VIX to remain at high levels (shameless promotion warning – this author is quoted in this article) –

http://www.marketwatch.com/story/only-a-black-swan-will-bring-back-stock-volatility-2014-05-18