VIX and the curve has been in a sort of zig zag pattern over the past few weeks with there being a couple of head fakes to the upside followed by a drop back down to the 2017 norm.  The 2017 norm has been all time lows and at last check it will take an average VIX close over 32.00 between now and the end of the year for 2017 to not go down as the lowest average VIX close on record. 

VIX Curve 12082017

At least one trader would be very happy if something occurred to push VIX higher, but maybe not to the 30’s.  Late Friday, with VIX at 9.78 and the standard December VIX futures contract at 10.85 there was a buyer of 3,000 VIX Dec 14 Calls for 0.28 and seller of 6,000 VIX Dec 22 Calls at 0.08 who ended up paying 0.12 per 1 x 2 spread.  Needless to say, the only known unknown between now and December 20th is the FOMC announcement this coming Wednesday.  I included a payoff based on Wednesday’s close along with expiration on the diagram below. 

VIX PO 12082017

This trade has a low up front cost at 0.12, but also starts to make money with a move over 12.00 on Wednesday.  I believe that’s a couple of the reasons the 1 x 2 structure is so popular.  Also, and I’m making an assumption that this is play on the FOMC announcement, if a move doesn’t occur Wednesday, there’s probably a way to salvage the trade for a loss of less than 0.12.