VIX is experiencing some seasonal pressure despite the looming FOMC meeting (and expected rate hike) this Wednesday. VIX finished the week with an 11 handle at 11.75. Without the final known unknown market event of 2016 coming up next week one can only wonder where VIX would be. The curve is steep, but that rise doesn’t really kick in until next year when the uncertainty of political change in Washington DC is probably hovering over the equity markets.
Things were fairly quiet in the VIX pit on Friday, but around lunch time I heard a bit of audible volume from the crowd just below the Options Institute. With VIX at 12.00 and the December VIX futures trading at 13.20 someone came in and bought 20,000 VIX Dec 16 Puts for 3.13 and sold 20,000 VIX Dec 14 Puts for 1.40. The net cost of this trade was 1.73 and a trade that payoff off as long as Dec 21st VIX settlement comes in at 14.27 or lower with a maximum profit of 0.27 as long as VIX settlement comes in under 14.00.