VIX rose a whopping 20% last week, although that is a jump off a pretty low base. This was in response to the S&P 500 dropping only 0.68%. Note the curve didn’t replicate the VIX move since the futures were already discounting higher volatility. Stated another way, the steep contango dissipated a bit as spot VIX narrowed the spread with the nearer dated futures.
At least one trader appears to be expecting a further run in VIX over the next few weeks. In the middle of the afternoon with VIX a tad over 14.00 and the September futures at 15.25 a buyer of an out of the money call spread came into the market. Using the standard Sep 21st options they bought 10,000 of the VIX Sep 20 Calls at 0.63 and sell 10,000 of the VIX Sep 25 Calls at 0.32 for a net cost of 0.31. The payoff diagram with important levels highlighted appears below.