This Week in VIX – 7/4/2014

VIX finished the week at a post 2008 low which can be attributed to a bullish reaction to the June jobs number and an extra-long weekend.

VIX PA

After attributing for a guesstimate of the impact of the extra days off on spot VIX I wonder if the July VIX contract is a bit overdone to the downside. There are seven trading days remaining until July settlement on the 16th and you never know what can happen in the markets. One itchy trigger finger in Ukraine or Iraq could quickly escalate into something that pushes VIX at least back into the low teens.

VIX

Finally, I always like to highlight interesting trades in this blog. Almost all the VIX option trades I show are to the bullish side. In fact they are generally cheap methods of having exposure to a spike in volatility. Well one of the last big spread trades on Thursday was actually bearish. Someone came in and bought over 6,000 VIX Jul 11.00 Puts at 0.18 and sold the same number of VIX Jul 10.50 Puts for 0.05 and a net cost of 0.13. The best case is for VIX to be under 10.50 at July expiration which would result in a profit of 0.37.

VIX PO

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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