Block Trade Analysis – VIX Weeklys Option Trades

Tomorrow is November VIX settlement, but that hasn’t stopped some short term VIX traders from putting on new positions, in fact it may have encouraged them to do some trading.

I ventured down to the trader floor late today to see what may be going on in the VIX Weeklys options set to settle on the open next Tuesday.  For those that know VIX well, you know that VIX futures and options normally settle on a Wednesday, 30 days before an expiration Friday.  However, December 25th is a Friday (and a holiday) so we have SPX options expiring Thursday the 24th of December.  Backtrack 30 days and we get a VIX Weeklys settlement on the open next Tuesday.

With about 30 minutes to go in the trading day I noticed the VIX Nov 24th 17, 18, 19, and 20 Calls all had traded about 7,000 contracts.  On the other side of the board over 17,000 VIX Nov 24th 16 Puts had traded.

I investigated further and it appears the Nov 24th 16 Puts traded in several lots over a 2 minutes period early in the day at an average price of about 0.28.  It appears it was paper selling.  The payoff on the open next Tuesday appears in the diagram below.  Note I’m only putting spot VIX on the diagram, which was at about 18.40 when the trade went off, since there’s a good chance this trade is to be held to settlement.

VIX PO 16 Put

The call trades were a little more perplexing.  But I did figure out that there was a seller of the VIX Nov 24th 18 Calls at 1.15 who purchased the VIX Nov 24th 20 Calls for 0.64 (net credit of 0.51 when VIX was at 18.00) and a seller of the VIX Nov 24th 17 Calls at 1.57 who paid 0.82 for the VIX Nov 24th 19 Calls (net credit of 0.75 when VIX was at 18.10).  For brevity sake I combined these two payouts into a single diagram below with the purple line representing the 17 – 19 spread and the red line below showing the payout at expiration for the 18 – 20 call spread.

VIX PO CS

It appears there were both bullish VIX and slightly bearish VIX players in VIX Weeklys today.  Also, it appears that everyone is happy with November 24th VIX settlement between 16.00 and 17.00.

Finally – if you want to know more about VIX Weeklys you can always visit www.cboe.com/vixweeklys