Weekend Review – VIX Futures and Options – 8/29 – 9/2

VIX finished the week just under 12.  We can attribute this to a combination of the equity market being pleased by Friday’s August Non-Farm Payroll report along with the three-day weekend effect.  Note the September futures, which settle on the 21st moved lower, but held up a bit relative to spot VIX.  This is common regardless of the directional move out of the index, but is accentuated whenever we have a long weekend.

VIX Table Chart

Despite there only being one trading day (and an overnight) left until expiration, over 30,000 Sept 7th VIX options traded on Friday.  Almost 1/3rd of that volume was focused on the VIX Sep 7th 13 Calls.  Early in the day someone chose to sell these calls for 0.45 in several lots.  This transaction did not appear to be part of a spread trade so  I’m going with the payoff diagram below as a depiction of how this may work out on the open Wednesday.


Later in the day there was a sale of 3000 VIX Sep 7th 13 Calls down at 0.32.  I investigated a little and this appears to be part of a spread that also put on a bear call spread.  In addition to the previously mentioned transaction, the trader also sold 3000 of the VIX Oct 19th 13 Calls at 3.54 and then completed the spread by purchasing the VIX Oct 19th 20 Calls for 1.08.  I’m going to do my best to keep an eye out for more 3000 lot sales of short dated VIX 13 strike call options to see if this is the beginning of a progressive trade.