The Week in VIX – 10/20 – 10/24

Like many people that make their living focusing on the financial markets I subscribe to @zerohedge on my twitter stream. Some of what comes from this is comical and over the top, but there are some very useful comments as well. Giving credit where credit is due @zerohedge pointed out that VIX was down 12% on Friday October 17, down 15.6% on Monday October 20, and down 13.4% on Tuesday October 21. This marks the only time in history that VIX lost 10% or more in three consecutive trading days.


The curve went from panic to calm in a very short period of time as well. I guess that is what a one week 4% rise in the S&P 500 will do. November is now the front moth future and with plenty of time to expiration it is only at a 0.84 premium to VIX. Note that December is also less than a point higher than VIX which can be partially attributed to a seasonal factor that always places a little weight on the December contract.


Finally, the last trade of note last week appears to expect VIX to stay below 20.00 for the next few weeks. There was a late seller of VIX Nov 20 Calls at 1.30 who also bought VIX Nov 24 Calls at 0.80 for a net credit of 0.50. As long as VIX remains below 20 that credit turns into a profit, another volatility event and VIX over 24 at November expiration will result in a loss of 3.50 and a less than happy Thanksgiving for one trader.