Weekend Review – VIX Options and Futures – 7/11 – 7/15

With VIX testing 2016 lows this past week the soon to be retired July future headed lower at a slightly faster rate than VIX dropping 6.43% versus 4.02%.  Even with the bigger loss on the week the July contract finished the week at more than a one premium to VIX.  We will see on Wednesday morning if the futures or the spot index win the tug of war into July settlement.  I would be remiss if I didn’t point out the steepness of the VIX curve from August to December.  VIX is low now, but the futures are braced for some sort of move higher.

VIX Curve Table

In a previous blog I mentioned VIX call buying that appeared to be short covering on Friday.  Here are the two instances that I came across.  First, one good trade appears to have sold 1000 of the VIX Jul 27th 22 Calls for 0.75 back on July 1st.  They came in Friday and bought those contracts back at 0.15 for a nice profit of 0.60.  The second trade has a couple of moving parts.  Back on July 6th there was a seller of 3000 VIX Jul 27th 15 Calls at 3.12 who also purchased 3000 VIX Jul 27th 23 Calls for 0.70 and a net credit of 2.42.   They closed on leg of this trade by covering the short calls for 0.85 on Friday and chose to leave the long piece of the spread trade open.  This means they have booked a profit of 1.57 and if we get any volatility event in the next few days they may improve on that outcome by cashing out the long 23 Calls.