There was a fairly parallel shift lower in spot VIX and VIX futures pricing as there wasn’t much to get excited about last week. The May VIX future dropped a little more than the spot index as expiration is just around the corner. Despite the almost 5% drop in the May contract, the premium relative to spot VIX is about 1.30.
The premium of the May futures contract relative to spot VIX got me looking into various puts that expire Wednesday morning. I copied down the closing offer prices for all May VIX puts that expire this week with strike prices from 13.00 to 17.00. I also included the intrinsic value for each option based on VIX at 12.38 (Friday’s close). The far right column shows the difference between this intrinsic value and the cost of each put. Note if VIX does not move at all into Wednesday expiration that each of these puts would be worth more than they cost on the close Friday afternoon. Please note, this is based on VIX not moving at all, but is an interesting exercise in see how VIX option pricing differs from other option markets.
Sticking with looking at May expiration, on Friday it appears someone put on a calendar spread using VIX Put options. In two different transactions they bought about 6,000 VIX May 14 Puts at 0.55 and sold 6,000 VIX Jun 14 Puts for 0.41. I’m guessing this is a trade into May expiration with the June options acting as a sort of hedge in case there is some sort of volatility event that pushes VIX to much higher levels over the next couple of days.