Last week VIX broke the 12 level, which surprised some market participants who felt 2016 was going to be a roller coaster ride that kept VIX at elevated levels.  I have already spent time on the Wall of Shame as I count as someone who felt VIX was spend more time around 20 than it has in several years this year.

Do note on the term structure chart below that the shape of the curve is steep.  Those of us grasping at straws with respect to elevated volatility see that as a glimmer of hope for higher VIX sooner rather than later.  Also, check out the October contracts which was up a bit last week despite the 5% drop in VIX.

VIX Curve Table

One trader late Friday came in with a spread trade that does well without a spike in VIX and does well if VIX makes a monster move to the upside in the next few weeks. The issue would be somewhere between those two outcomes.

With spot VIX at 12.02 and the August future at 15.30 someone sold 7,500 VIX Aug 18 Calls at 0.77 and then purchased 15,000 of the VIX Aug 24 Calls for 0.29 which comes to a credit of 0.19 per 1 x 2 spread.  As long as VIX remains under 18.00 between now and August expiration this trade ends up with a profit equal to the credit.  To the upside a spike in VIX may result in some trading around this position.  Holding through expiration, which is unlikely if we do see a volatility event, VIX needs to higher than just a tad lower than 30.00.