June VIX futures and options settle next Wednesday on the open so we are starting to see traders look ahead to July standard expiration. Of course those that want to be more strategic can explore the VIX Weeklys, but that is an argument for another blog.
This morning, exactly an hour into the trading day there was a buyer of 8,500 VIX Jul 17 Calls at 1.99 who then sold 17,000 VIX Jul 21 Calls for 1.03 each and a net credit of 0.07 per spread. The result is a small credit and a payoff at July expiration that looks like the diagram below.
As highlighted on the chart VIX was at 14.71 and the July futures were trading at 17.20 when this trade was executed. Odds are a spike in VIX over the next few weeks would result in our trader getting out of the spread with some sort of profit or altering the composition on the trade. However, if held to expiration all is well all the way up to just above 25.00 (25.07 to be exact) with a best case scenario of VIX settlement at exactly 21.00.