The combination of VIX moving lower and June becoming the front month put some pressure on the June futures last week. I think maybe the lack of news flow expected over the next couple of weeks has something to do with that as well. Note the bifurcated futures performance from last week with many longer dated futures rising, which maybe could be the risk of higher rates or an ‘interesting’ presidential election hovering over the markets. Finally, I always like to periodically point out the ‘dip’ that is December futures. It’s already showing up and is due to the number of holidays that occur between December VIX expiration and the S&P 500 Index options (SPX) that are used to settle VIX in December. This year it may be also be function of the markets assuming the election uncertainty will be behind us.
Midday on Friday someone came in and got some tail risk protection for real cheap. With spot VIX around 15.50 and the June VIX futures nearly two points higher around 17.50 there was a buyer of an out of the money call spread using the standard June 15th VIX calls. In a few different lots they purchased the VIX Jun 30 Calls for 0.18 and sold the VIX Jun 40 Calls for 0.07 and a net cost of 0.11 per spread. Any volatility event between now and the market open on June 15th could result in quite the payoff as seen below.