Weekend Review – VIX Options and Futures – 9/26 – 9/30

The VIX curve did The Twist (cue Chuck Berry) as spot VIX rose 8% and the front month October contract was up by just over 1%.  Beyond the front month all things were red.


The highest closing level for VIX last week came on Monday with the spot index finishing the day at 14.50.  One trader had an expectation that this move up would very short lived and decided to sell a call spread with VIX Weeklys Options that expired on the open this past Wednesday.  Just a few minutes before the close there was a seller of the VIX Sep 28th 13.50 Calls at 1.17 who bought VIX Sep 28th 15.00 Calls 0.42 for a net credit of 0.75.  The payout diagram below assumes the trade was held through Wednesday settlement.


For those that are aware that the corresponding VIX futures pricing comes into play with respect to VIX options pricing I’ll add that the Sep 28th VIX Future closed last Monday at 14.60, basically in line with spot VIX.  The risk reward of this trade was a gain of 0.75 or a loss of 0.75 with the break-even at 14.25.  I highlighted Wednesday’s VIX settlement on the payoff diagram below which was safely below the short strike of 13.50 in this trade at 13.05.