VIX threatened to close the week with a 9 handle, but managed to stay out of single digit territory. Spot VIX was down over 16% and the standard September futures contract which goes off the board on the open Wednesday was down 16% as well. There’s still a premium of 0.95 between spot and September VIX, but the gap that has persisted until recently is closing. October, which will take over as the front month, remains at a premium of about 1.75.
Friday was fairly quiet, but someone had lots of interest in a particular VIX Weekly option contract. Over 54,000 of the VIX Sep 27th 21 Calls traded on Friday at 0.10. The time and sales shows several very large blocks execute in the VIX pit over the course of the day. I have no idea what’s up with this trade, but we have to be impressed with the liquidity offered for a non-standard VIX expiration.
On Monday, with spot VIX at 10.70 and the September future at 12.35 a trader came in executing a short term trade hoping VIX is somewhere in a relatively wide range next week. The trader sold the VIX Sep 15 Calls for 0.30, sold the VIX Sep 15 Puts for 2.92, and then rounded things out by purchasing the VIX 18 Calls for 0.20 and a net credit of 3.02. The payout at VIX settlement next week shows up below.
This trade is in trouble only if VIX is under 11.98 at settlement next Wednesday AM. The trader behind this short straddle plus long call is most likely looking for a pop in VIX to salvage the trade early next week.