VIX had a good week based on news out of Washington, DC.  This seems to be the only type of event that get VIX moving.  The December contract is still at a bit of a premium which may be taken as traders bracing for a little follow through. 

VIX Curve 12012017

On Friday, we got part three of a trade that was commenced back in July.  If you want some more history on this trade I wrote up the last rolling transaction back in September. 

http://www.cboe.com/blogs/options-hub/2017/09/25/block-trade-analysis---vix-roll-trade

The trade started in July when about 260,000 Oct 12 Puts were sold, 260,000 Oct 15 Calls purchased and finally 520,000 Oct 25 Calls were sold for a credit of 0.20.  The trade was then rolled to December VIX options in September and on Friday the December positions were rolled to January.  There are so many moving parts that I decided it would be best to show all the trades in the format below. 

 

Initiated Trade – July 21, 2017

  • Sell 1 VIX Oct 12 Put at 0.75
  • Buy 1 VIX Oct 15 Call at 1.45
  • Sell 2 VIX Oct 25 Calls at 0.45 each

Credit of 0.20 / Running Credit of 0.20

First Roll Date – September 25, 2017

  • Buy 1 VIX Oct 12 Put at 0.87
  • Sell 1 VIX Oct 15 Call at 0.63
  • Buy 2 VIX Oct 25 Calls at 0.15 each

Cost of 0.54 / Running Cost of 0.54

  • Sell 1 VIX Dec 12 Put at 0.80
  • Buy 1 VIX Dec 15 Call at 1.80
  • Sell 2 VIX Dec 25 Calls at 0.67 each

Credit of 0.34 / Running Cost of 0.00

Second Roll Date – December 1, 2017

  • Buy 1 VIX Dec 12 Put at 0.90
  • Sell 1 VIX Dec 15 Call at 0.90
  • Buy 2 VIX Dec 25 Calls at 0.20 each

Cost of 0.40 / Running Cost of 0.40

  • Sell 1 Jan 12 Put at 0.70
  • Buy 1 Jan 15 Call at 1.50
  • Sell 2 Jan 25 Calls at 0.50 each

Credit of 0.20 / Running Cost of 0.20

So, excluding commissions, our trader now is short the VIX Jan 12 Puts, long the VIX Jan 15 Calls, and short twice as many VIX Jan 25 Calls at a net cost of 0.20.  The payout if held through January settlement shows up below, but my assumption is this trade is in place to try to capture some sort of volatility spike.  As always any updates will be discussed in this space.  

VIX PO