Weekend Review – VIX Options and Futures – 4/11 – 4/15

VIX fell to 13.62 as the S&P 500 put up some gains last week. The curve shifted lower, but is steep, even the expiring April contract finished the week at about a 1.50 premium to spot VIX.



I noticed that the S&P 500 was higher than the close two weeks ago and VIX was higher as well. This is something many traders take a look at and may consider it a non-confirmation of the recent rally. Let’s see this coming week if the 13.00 low in VIX for 2016 holds on any equity market strength.

VIX SPX Corrected


On Monday an interesting trade came through the VIX pit and utilized some of the relatively new VIX Weeklys options. There was a seller of the VIX May 11th 16 Calls at 2.27 who purchased VIX May 11th 16 Puts for 1.00 and also spent 0.75 on the VIX May 11th 23 Calls. All this trading resulted in a credit of 0.52 and a payoff at expiration that looks like the diagram below.  The VIX and VIX futures pricing is from Monday as well.


So astute readers will note this is nothing more than a long put payoff. In fact, it is equivalent to buying the VIX May 11th 23 Put for 6.48. So why didn’t the trader just buy the 23 Put? Most likely the plan is to trade around these positions in the event of a move in the underlying market. If I pick up on what looks like someone trading around these positions I’ll be sure to report back in this space.