Summer is here, it’s sunny and 70 degrees outside as I write this so I'm writing fast in order to get out there before the weather turns again. Another indication that summer is here can be seen in the relatively quiet price action in the equity markets. It was a pretty non-volatile day for the markets. About an hour before the markets closed, a trader in the VIX pit actually rang the ceremonial bell (at the urging of the rest of the pit) as a humorous attempt at giving traders the rest of the day off. It didn’t work and VIX closed at 3:15 like any other day. However, for the week, there wasn’t much change across the VIX futures curve as the S&P 500 was down less than 1% last week.

VIX Curve and Table

The thing about the picture above that keeps catching my attention is the dramatic slope to the upside into the end of 2015. It may be taken that the concern about a drop in the equity markets is most concentrated toward the end of this year.

On Friday there were two block trades that caught my eye as they was executed in options expiring in September. First, about 10:00 am Chicago time there was a buyer of 10,000 VIX Sep 20 Calls at 1.68 who also sold 10,000 VIX Sep 30 Calls at 0.65 for a net cost of 1.03.   This trade went off when VIX was around 14.82. A few hours later and about 45 minutes before the market closed on Friday there was a seller of 10,000 VIX Sep 15 Puts at 0.85. At this time VIX had drifted down to 14.38. The sizes of the two trades are the same, but I have no way of knowing if they were related. A visit to the VIX pit on Monday morning is in order to clear this up. However, regardless if this was the same trader or two different traders, the outlook in either case would be for higher VIX in September.