VIX managed a finish over 20 as Friday’s market action raised the level of concern among market participants. You have to wonder if Friday August 21st and the follow through on the 24th is still fresh in trader’s minds.
The short term curve flattened out which seems to be the norm when VIX move higher, since VIX Weeklys are relatively new.
Mid-day on Friday while VIX was still under 20.00 (19.60 to be exact), there was a buyer of the VIX Dec 25 Calls who paid 1.10 and now has exposure that benefits from a repeat of late last August. Less than two minutes later someone came in and bought the same number of VIX Dec 20 Calls and paid 2.10 for those options. Both trades were 7500 lots and come darn close to a ‘call stupid’ which is a spread trade where two calls are purchased. The origin of calling this stupid trade relates to no selling, just buying options which means paying double premiums. However, if we experience a sell-off in the S&P 500 between now and mid-December we will not be allowed to make disparaging remarks about the traders behind these trades.