VIX reached 2017 highs last week as we got our first experience with downside volatility in 2017.  VIX closing at 13.12 widens the low to high range for the first quarter to 2.54.  Barring a close of 13.26 on the upside or 10.44 on the downside next week this will go down as the narrowest VIX range on record. 

VIX TS Table325

We continue to look to our friends in Europe for volatility guidance.  After the Dutch election results VSTOXX had the biggest one day drop on record.  Equity market weakness along with a renewed focus on the French election resulted in a nice rebound in the spot VSTOXX index.  However, do note that the futures didn’t do a whole lot on a week over week basis.  Sometimes volatility futures do a pretty good job of anticipating changes in the spot index and don’t necessarily move in sync with the index.  This is a good example of this type of price behavior. 

VSTOXX Curve325

About 15 minutes before the market closed for the week a trader came into the VIX pit with an interesting risk reversal.  April VIX futures were at 14.00 and the spot VIX was at 12.84, off the highs of the day that had VIX over 14.00 for a short period of time.  This trader sold 1,000 VIX Apr 19th 12 Puts for 0.22 and bought 1,000 VIX Apr 19th 25 Calls for 0.18 and a net credit of 0.04. 

VIX PO 325

This is an interesting trade because it takes in a small credit which may turn into a profit as long as April VIX settlement is above 11.96.  Also. it gives the position holder long exposure to VIX that may pay off if we get some sort of volatility event between now and April expiration.