VIX returned to being a ‘tween’ this week finishing with a twelve handle. The rest of the curve shifted lower as all fear with respect to a Trump administration seems to have dissipated. At least for the moment. There are some risk events between now and the end of 2016 which I’ll address after the table below.
CBOE’s partner LiveVol has a great option analyzing tool and one of the features is that you can easily see At-the-Money implied volatility for different expirations. This is particularly cool with respect to SPX options which have multiple expirations each week. I’ve started playing around with the numbers and comparing them with different events that we know might move the markets in the future. This is still a work in progress so suggestions are welcome.
Implied volatility rises as we go farther out in time, but I do think it’s interesting to see the lull then move up into December 14th on the chart above. I’ve included the Electoral College even though it’s doubtful that anything dramatic may happen on that date. But of course I was on a panel a few months ago where one of the participants refused to discuss even the possibility of a Trump presidency since he, “didn’t want to waste time on something so impossible”.
Finally, next week is a holiday shortened week that give the US markets the closest thing to a four day weekend we will ever get. I think someone believes volatility will remain low and used the VIX Weeklys options to express this outlook. Early Friday, when VIX was still in the 13’s there was a buyer of about 10,000 VIX Nov 23rd 13 Puts in several lots between 0.15 and 0.20. The payoff appears below with Friday’s VIX close highlighted and any settlement 0.05 lower than Friday's close will turn this trade into a winner and give one person some extra $$$ for next week's Black Friday.