Weekend Review – VIX Futures and Options – 9/12 – 9/16

VIX gave up a little over 12% while the futures were lower, but not nearly to the extent that spot VIX lost value.  We are back to contango in the blink of an eye.

VIX Futures Table

VIX options and futures trade until 3:15 Chicago time each day.  Late Friday, after the official stock market closing time of 3:00, someone came in and did a pretty interesting trade in VIX.  The trade involved a purchase of 3,000 VIX Sep 21st 20 Calls at 0.19 each and then sold 10,000 VIX Sep 21st 23 Calls for 0.07.  Excluding commissions this trade paid out $57,000 for the 20 Calls and took in $70,000 for the 23 Calls for a net credit of $13,000.  The payout diagram below is based on profits in thousands of dollars.

VIX PO

VIX was at 15.41 when the trade was executed.  If doesn’t rally in the next couple of days this trade will turn out fine.  A move to 23.00 would be a thing of beauty resulting in a profit of over $100,000.  Do note how things can turn quickly if we get some sort of volatility event in the next couple of days.