Weekend Review – VIX Options and Futures – 3/6/2016

VIX gave up over 14% as the S&P 500 tried to work back to the 2000’s last week, falling short by 0.01.  Note the steepness of the curve below with the standard March contract at over a two point premium to spot VIX.

VIX LT Curve

The generic curve is also a bit steep, considering it is normally pretty flat.  VIX may be low, but even the short dated futures are braced for higher levels.

VIX ST Curve

With VIX under pressure on Friday, someone came in to the market using one of my favorite VIX option spreads.  There was a spread that sold the VIX Apr 18 Put at 0.98, purchased the VIX Apr 21 Call at 1.88 and then sold the VIX Apr 27 Calls for 0.84.  The net result was a cost of 0.06 and a payoff that is in danger below 18.00 and benefiting from 21.00 and higher with profits capped at 5.94 if April VIX settlement comes in at or above 27.00.

VIX PO

 

The posts on this blog are opinions, not advice.
Please read our disclaimer for Indices.

2 Comments

  1. Jim Carroll says:

    Checking the math on your trade. Selling put and call for .98 each brings in 1.96 against call purchase of 1.88. Wouldn’t this result in a net credit of 0.08 instead of a cost of 0.06?

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