Last week VIX managed to finish the day below the 2016 closing low (11.27) twice. If it were only Friday’s close I’d throw an asterisk in there for the three-day weekend effect, but there’s no holiday excuse for the Wednesday close of 11.26.
This past week they (whoever ‘they’ are) couldn’t get enough of February VIX Calls. On Friday, paper bought over 60,000 VIX Feb 21 Calls for 0.49. On Thursday, there were three block trades of over 20,000 contracts each in the VIX Feb 22 Calls paying 0.48 or 0.49. Wednesday morning there was a purchase of 98,228 VIX Feb 22 Calls for 0.47 and on Tuesday there was a block purchase of 99,400 VIX Feb 21 Calls at 0.48. On Monday, there wasn’t any huge action in those two strikes. At minimum it appears one or more big traders scooped up over 150,000 of the Feb 21 and 22 Calls last week. One side effect of this demand for VIX calls is a rise in VVIX which gained over 10 points last week, despite the drop in VIX or maybe because of the low level of spot VIX.
This sort of divergence showed up a few times last year, where VVIX started to move up and then VIX followed a short time later. We will see if this pattern is repeated over the next couple of weeks.