The Week in VIX – 5/18 – 5/22

The VIX futures curve was lower last week with June losing more than the index or other futures as it was awarded the official title of “Front Month” with May VIX futures and options settling on the open Wednesday. Below I’ve changed things up a bit and the comparison is a year over year look at VIX and the VIX futures from Friday and a year ago on the Friday before Memorial Day.

Term Structure Plus Table

I was visiting the VIX pit with the attendees of the May version of The Option Institute’s Investing and Trading for College Students program shortly after the open on Friday. I actually heard this trade executed as an open outcry negotiation and knew what trade I was going to write about this weekend. There was a sale of 2725 VIX Jun 13.50 Puts at 0.47 combined with a purchase of 2725 VIX Jun 17.00 Calls at 0.57 (mostly at 0.57 – but this was the highest price so we’ll go with it). The net cost for this trade was 0.10 and a payout at June settlement that looks like the diagram below.


Note that there is risk below 13.50 due to the short put, but some real benefit if we get a spike in VIX between now and June VIX settlement which I have a feeling is what the l