Weekend Review of VIX Futures and Options – 12/24/2017

December VIX went off the board and January became the front month this past week.   VIX moved higher for the week, however, all the standard futures moved down a bit.  The contango is still steep as traders start to brace for 2018.

VIX Curve Table 12222017

Late Friday someone executed the VIX version of a covered call focusing on the standard March expiration.  About 1200 of the VIX Mar 13 Puts were sold at 1.92 and March 13 Calls purchased for 2.03.  For those who don’t remember their put-call parity from school short put plus long call is the equivalent of being long the underlying.  In VIX world the closest thing to an underlying for the options is the corresponding future.  At the time of the trade the March VIX future was trading at 13.10, the synthetic long position created by selling the put and buying the call cost 0.11.  Adding 0.11 to the strike price gives you an equivalent price of 13.11.

Now that I’m done lecturing about put-call parity I’ll get back to the trade.  The trade was finished with the VIX Mar 23 Calls being sold for 0.76.  The net result was a credit of 0.65 and a very familiar looking payoff at expiration.

VIX PO 12222017

The posts on this blog are opinions, not advice.
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