We’ve experienced several twists in the volatility markets this year where the futures don’t move in sync or in line with spot VIX. This occurred again last week as VIX rose almost 6% while the futures markets moved lower. Part of this may be attributed to February going off the board, at least with respect to March, but the farther date futures had been a bit elevated this year, but with the lack of any sort of volatility event appear to have started to weigh on the farther dated part of the curve.
VIX Weeklys options continue to garner more interest. Over the past week, I came across a trade that is pinpointing higher volatility sometime before the end of February. In a handful of lots someone sold 10,000 VIX Mar 1st 12 Puts for 0.50 and then purchased the same number of VIX Mar 1st 13 Calls for 0.75 and a net cost of 0.25. It was nice to see a sizable trade executed in that market as a confirmation of there being enough liquidity in the non-standard expirations to facilitate a large trade like this. The payout at March 1st settlement appears below, but as always, I’m going to assume a volatility spike between now and then would result in the call side of this trade being exited.