We closed a chapter in VIX history with the April 2015 contract going off the board last week and May stepping in to be the new front month. May finished the week over a point closer to the spot VIX index as VIX rose over 10% and the May future only gained about 1.6%.

VIX Futures Curve

About 45 minutes into the trading day there was a volatility trader looking out to June and expecting VIX to remain below 18.00 or at least be under 18 at June settlement. The trader sold 9,200 VIX Jun 18 Calls at 1.63 and then purchased 9,200 VIX Jun 26 Calls for 0.63 and a net credit of 1.00. The payoff diagram below shows the result at expiration along with closing prices for VIX and the June VIX future.


June VIX futures finished the week at about a 3 point premium to the spot index. Remember that VIX option prices are derived from a level closer to the corresponding future than the spot index so VXM5 near 17 results in a 1 to 7 reward to risk trade with the spot index below 14.00.