This Week in VIX – 7/11/2014

It looked for a while this week that we were finally going to get a ‘volatility event’ for the first time in months. A small EU country has some problems and we have seen this story play out before and in an ugly way. However, like all potential market calamities in the past few years this one was pretty much shaken off and VIX reverted back to low levels. It is worth noting that VIX only climbed into the teens for part of a day, so again VIX didn’t overreact when it was not warranted.

VIX PA

The VIX Futures curve only shifted on the short end and was hardly moved beyond the front two months. It is worth noting that we have seen some early trades that focus on higher volatility using September options. I’m not sure if there is a specific event or just the usual timing of fear in the September to October period that comes along at that time of year.

VIX

There has been a consistent buyer of the VIX Sep 18 Calls that has been showing up periodically over the past couple of weeks. Since they have been buying over the course of days and the pricing has varied I put together the payout diagram below showing the closing offer for the option (0.75), along with VIX and October VIX futures closing prices from Friday.

VIX PO