The S&P 500 drop, which can be mostly attributed to market action on Friday, resulted in VIX putting up a pretty bullish week. Everyone is aware that we had a short week last week and VIX traders know this can cause a little disorientation when looking at VIX relative to the futures pricing. The curve below shows that VIX was up over 14% last week while the respective futures were pretty quiet. VIX futures traders are aware that VIX is a bit depressed before long weekends and tends to rebound afterward.

VIX Curve Table

With a couple of hours to go in the day on Friday there was a long call broken wing butterfly trade that came into the VIX pit. The trader purchased 1 VIX Jun 15 Call at 0.86, sold 2 VIX Jun 19 Calls for 0.37 each and finished the trade by purchasing 1 VIX Jun 22 Call for 0.22. The end result was a cost of 0.34 per spread. If you multiply 10,000 times the sizes above you get the idea of how big this trade was. The payout below, as always, assumes the trade is held to June expiration –


With VIX over 15.34 this trade is in good shape at expiration. However, as we are going into a week that may result in some extra volatility for the equity markets I would assume early profit taking on any spike in VIX and the June VIX futures.