VIX had quite a midweek move rising above 15.00 for a very short period of time before settling at 11.18 to end the week. Note the VIX action didn’t have much of an impact on the futures contracts which can be attributed to the steep nature of the curve going into last week.
I spoke about the following trade on the Vol Views podcast this past Friday. However, it was such a great use of VIX Weeklys that I wanted to repeat the trade here. On Monday last week, with VIX at 9.80 a trader came in and purchased 989 VIX Jun 28th 9 Calls for 1.25 and then sold 989 VIX Jun 28th 10 Calls for 0.41 and a net cost of 0.84. All they needed was a VIX settlement on Wednesday morning above 10.00 to realize a gain of 0.16. I know the numbers aren’t all that exciting, but this is a good use of very short dated VIX options with an outcome that is pretty likely to result in the maximum profit of 0.16. Note on the payoff diagram below that’s exactly what happened as VIX settlement for June 28th came in at 10.52.