This Week in VIX – 9/19/2014

The S&P 500 put up another record high last week and VIX dropped. However, it is worth noting that the intraday low in VIX this past week (11.52) was a bit higher than the recent dips associated with new S&P 500 highs.  Maybe, like many of the permabears in the world, I’m stretching while looking for a crack in the armor that is the US stock market.  But when reviewing data I was truly surprised to see that we did not break 11.00 and that just four weeks ago there was a lower low in VIX.

VIX PA

The curve is a bit steep between the spot index and front month future. I guess that hat may be referred to as an October effect which is associated with market corrections always seeming to occur around this time of year.  I’m actually going to add a little anticipation into the mix and say 3rd quarter earnings may be hanging over VIX as well.

VIX CURVE

VIX continues to lurk around pretty low levels, but that does not stop traders who expect VIX to stay relatively low. On Thursday there was a trader who sold just over 16,000 of the VIX Oct 18 / 21 Call Spreads for 0.18 by selling the VIX Oct 18 Calls at 0.57 and buying an equal number of the VIX Oct 21 Calls for 0.39.  The motivation for this trade must be that VIX remains low or if there is a move up in VIX it does not go much beyond the lower strike of the spread (18.00).

VIX PO