Weekend Review of VIX Futures and Options – 1/28/2018

VIX was lower last week, but that’s the only thing that lost value on the table / term structure chart below.  All the futures moved higher despite VIX moving lower, but also shaking off a very bullish week for the S&P 500.  We live in unusual times and there is much being written about the VIX behavior which seems to be ignoring record S&P 500 moves.  Usually this disconnect rights itself with either stock prices dropping or VIX finally giving into the reality of a higher S&P 500.

VIX Curve 01262018

Before moving on to a trade I’d like to note that on Friday there was a seller of just over 25,000 VIX Feb 7th 21 Calls who was able to get the whole trade crossed with two counterparties in VIX pit at Cboe.  I don’t know if they are short the calls versus futures, speculating, or what.  I just wanted to note how a large trade is being done in the non-standard expirations.

For a trading example I’m sticking with the Weeklys, but reporting on a smaller trade.  First thing Friday, with VIX around 11.60, there was a trade buying the VIX Feb 7th 13 Calls for 0.69 and selling the VIX Feb 7th 21 Calls for 0.10 resulting in a net cost of 0.59.  The hope behind this trade is for a move to the mid-teens between Friday and a week from Wednesday.  The only big number I came across was January employment next Friday, but as skittish as the stock market has been, it may not take too much news to push VIX to levels this trade is hoping for.

VIX PO 01262018

Weekend Review of Volatility Indexes and ETPs – 1/28/2018

Three out of four volatility indexes that based their levels on SPX option trading were higher last week.  VIX was the lone loser with 9-day, 3-month, and 6-month volatility indexes all moving higher.


The long volatility linked ETPs, based on US volatility, were all higher last week.  Note things were different in Europe as EVIX was lower and EXIV gained.  Also, I continue to keep an eye on TYVIX which is showing signs of life as the talk of the end of the bull market in bonds continues to gain followers.

VXX Table 01262018

The volatility index space was mostly higher last week, despite a huge gain in US equity prices.  Brazilian volatility came under pressure as EWZ has a very strong week.

Vol Indexes 01262018

The long and leveraged long volatility ETPs made a big push to the upside on Thursday before backing off a bit Friday.  For this week’s trading example, I went searching for a trade that stepped up with a short term bearish option execution on Thursday.  It was very difficult to find something to talk about.  I came across several examples of bullish option trades using contracts expiring on January 26th, which were likely traders covering shorts.  I think the difficulty in finding a short biased trade from Thursday last week may be anecdotal evidence that market participants are pretty concerned about a true volatility event being just around the corner.

The successful bearish trade I came across sold the UXVY Jan 26th 10 Calls for 0.27 and purchased the UVXY Jan 26th 11 Calls for 0.09 when UVXY was at 10.03 on Thursday.  The net result was a credit of 0.18 and a potential loss of 0.82.  UVXY did work higher over the course of Thursday, but did spend most of Friday under 10.00 and clearly in a safe place for this one-day bear call spread.

UVXY PO 01262018

Weekend Review of VIX Futures and Options – 1/21/2018

Although still at a historically low level, VIX showed some signs of life this past week trading above 12.00 for the first time since December 1st last year.  Standard January futures and options went off the board Wednesday morning settling well above 12.00.  The futures moved up a bit, but not nearly to the extent of spot VIX.  This may be taken as the market expecting VIX to return to historically low levels.  Of course when this has been the case for so long, why wouldn’t the traders not push the futures higher.

VIX Table 011292018

The last big trade in the VIX pit Friday occurred with just seconds left in the day.  Someone came in and purchased 2000 VIX Feb 13 Calls for 0.94 and sold 2000 VIX Feb 18 Calls for 0.42.  The net result was a cost of 0.52 and a decent payoff if we get follow through to the upside on the recent VIX strength.  They may have even been hoping for volatility to rise early next week based on the government shutdown not being resolved by Monday.

VIX PO 01192018

Weekend Review of Volatility Indexes and ETPs – 1/21/2018

All four volatility indexes based on S&P 500 Index option pricing moved higher last week.  I know all the talk was about the government shutdown being responsible for the rise.  However, if that were totally the case I don’t think we would be seeing VIX3M and VXMT moving up as much as they did.  I believe there’s more going on here, but I also spend most Friday evenings watching Ancient Aliens.


In the ETP space the long funds benefitted from the bump in VIX futures.  Also worth paying attention to is the gain in VVIX, SKEW, and TYVIX.  Risk is coming back into the markets in a broad way.

VXX Table 01192018

The majority of volatility indexes we quote at Cboe Global Markets were higher last week.  On the downside GS and IBM volatility dropped, based on earnings releases and Gold, Oil, and Sliver volatility were all lower.

Volatility Indexes 01192018

On Thursday, with moderate fears of a government shutdown pushing volatility markets higher, one trader came in with an interesting spread.  They sold 150 VXX Jan 19th 27 Calls for 0.40 and then purchased 200 VXX Jan 19th 28.5 Calls for 0.12 each.  Basically they purchased four calls for every three sold.  The net result was a credit of $3600 (excluding commissions).  This trade was executed with VXX near 27.00.  A payoff diagram based on Friday’s close appears below.

VXX Payoff 01192018

This trade was a little dicey early on Friday VXX traded as high at 27.40 which would have resulted in a loss of $2400 if that’s where VXX had closed.  Although the government did shut down, VXX finished Friday a bit lower on the day and if this trade was held through the close the result was a profit equal to the credit of $3600 taken in late Thursday.

Weekend Review of VIX Options and Futures – 1/14/2018

VIX gained and the futures curve dropped a bit last week. This is not totally out of the norm, but before a holiday weekend is something I cannot recall occurring in my years of watching VIX price action.

VIX Table Curve

Wednesday last week was the second busiest day on record in the VIX option arena.  A good portion of this can be attributed to one very large position being rolled from January to February VIX contracts.  It turns out this has been an ongoing saga starting back in the summer.  Here’s the full story of this short 1 VIX 12 Put, long 1 VIX 15 Call, short 2 VIX 25 Calls spread trade.

The first part of the story begins on Friday July 21st when a trader initiated a spread that sold 1 VIX Oct 12 Put for 0.75, purchased 1 VIX Oct 15 Call for 1.45, and the sold 2 VIX Oct 25 Calls for 0.45 each for a net credit of 0.20.  This spread was traded a little over 260,000 times (260,000 of the 12 Puts and 15 Calls and 520,000 of the 25 Calls).  The payout if held to October expiration appears below.


On September 25th the trader rolled this position from October to December.  They bought the VIX Oct 12 Puts for 0.87, sold the VIX Oct 15 Calls at 0.63, and then covered the VIX Oct 25 Calls for 0.15 each.  Exiting the October position cost 0.54 per spread.  A December position was initiated in the same contracts with 1 VIX Dec 12 Put being sold for 0.80, 1 VIX Dec 15 Call purchased for 1.80, and 2 VIX Dec 25 Calls sold for 0.67 each for a net credit of 0.34.  Combining the October and December legs resulted in a cost of 0.20, which is equal to the credit taken in back in July so at this point the running trade was done for no cost.  The payoff below shows how this trade would work at different levels upon December expiration.


Note the second payoff diagram is very similar to the first, but shifted down a little bit.

A third rolling transaction occurred on December 1st last year with the trade being rolled from December to January.  The VIX Dec 12 Puts were purchased for 0.90 and two Dec 25 Calls purchased for 0.20 each while the VIX Dec 15 Calls were sold for 0.90.  This leg results in a cost of 0.40 to exit.  The VIX Jan 12 Puts were sold for 0.70, VIX Jan 15 Calls purchased for 1.50 and then finally two VIX Jan 25 Calls sold for 0.50 each.  The January leg generated a credit of 0.20 so the third rolling transaction cost 0.20 which is at this time was the running cost for this trade.  The payoff diagram below takes into account the running cost of rolling this trade since inception in July.


This payoff diagram is very similar to the first two, but has shifted down a little bit with a loss of 0.20 at expiration.

Now we get to this week.  This past Wednesday this trade was rolled out to February.  The VIX Jan 12 Puts were purchased for 1.53, the VIX Jan 15 Call sold for 0.12 and finally the two VIX Jan 25 calls purchased for 0.04 with a net cost of 1.49 to exit the January part of the trade.  The rolling trade moved exposure to February contracts which expire on Valentine’s Day (early reminder guys).  The VIX Feb 12 Puts were sold for 1.38, the VIX Feb 15 Calls were purchased for 0.73 and then finally two VIX Feb 25 Calls were sold for 0.27 each.  This part of the trade generated a credit of 1.19 resulting in a cost of 0.30 per spread for this roll.  This means the net running cost for this trade is now 0.50 and a payout at February expiration that looks like the diagram below.


This trade is looking for some sort of volatility event with a potential trade occurring to take profits if we get the long overdue spike.  As always if something happens worth talking about we will report back in this space.

Weekend Review of Volatility Indexes and ETPs – 1/14/2018

We got an interesting move in the VXST – VIX – VIX3M – VXMT curve last week.  The short end moved higher despite a nice bullish move out of stocks.  The volatility market has been a bit jumpy like we are bracing for an unforeseen spike.  We’ll see if the nervousness is justified.


I’ve been keeping a close eye on TYVIX since the bond market has been discussed pretty frequently in the financial press lately.  Until it starts to move I’m going to consider the talk nothing to get excited about.  Just for perspective, the long term range for TYVIX is from a 3 to an 11 handle.

VXX Table 01122018

Pre three-day holiday weeks usually have more volatility indexes down on the week than appear below.  The currency markets were by far the leaders which means this may be the place to explore for trades that require some price movement.

Volatility Table 01122018

Early Friday, with UVXY at 8.62, a trader came in with a low cost trade gaining positive exposure to any potential ‘volatility event’ next week.  They specifically sold the UVXY Jan 19th 8 Puts for 0.09, bought the UVXY Jan 19th 10 Calls for 0.16, and then finished things up by selling the UVXY Jan 19th 12 Calls for 0.09.  The net result is a credit of 0.02 and a payoff that looks like the diagram below.

UVXY PO 01122018

This trade is fine as long as UVXY doesn’t move below 8.00 next week.  Of course the goal is a huge move to 12.00 which if held through expiration places the profit at just over 2.00.

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

Weekend Review of Volatility Indexes and ETPs – 12/24/2017

The volatility index price action relative to the equity market price action was pretty interesting last week.  The S&P 500 was higher, as were three of the four volatility indexes calculated using S&P 500 option pricing.  VXST was lower, but that is very common before three day weekends due to the calculation methodology (calendar days) when we have the market closed for three days.


VVIX stays over 90 and moved up a bit last week and TYVIX moved nicely off closing at an all-time low on the previous Friday.   The long funds suffered a bit despite VIX moving higher as a reminder that VXX is not VIX.

VXX Table 12222017

Usually the holiday season with the extra days off results in volatility indexes suffering a bit of a head wind.  I was surprised to the point of double checking numbers before posting the table below as I would have expected more indexes lower than higher last week.

Vol Index Prices 12222017

UVXY hasn’t had a very good 2017, which is being polite.  At least one trader thinks UVXY will not be gaining any of the losses back next week.  With 2 minutes left in the day and UVXY at 10.10 a trader sold 600 UVXY Dec 29th 10.00 Calls for 0.43 and then purchased 600 UVXY Dec 29th 12.50 Calls for 0.14 taking in a credit of 0.29.

UVXY PO 12222017

Note in the payout diagram above, UVXY only needs to drop 0.10 or more.  Considering that UVXY dropped 36 of the last 50 weeks and the average weekly performance being down over 4%, this trade makes some sense.  Barring a year end volatility event things should work out as hoped for this trade.

Weekend Review – VIX Futures and Options – 12/17/2017

VIX worked its way lower Friday as the stock market rallied.  We have grown accustomed to VIX below 10.00 and settlements below 10.00 as well.  However, for the first time I can recall, we had a VIX futures contract close below 10.00 with the December future that expires next week settling at 9.925.

VIX Curve 12152017

Thursday, with VIX around 10.05 and the Dec 27th future at 10.65 someone came in and put on a bearish VIX trade using the Dec 27th Weekly options.  They sold 300 of the VIX Dec 27th 12 Calls for 0.46 and purchased 300 of the VIX Dec 27th 14 Calls for 0.28 taking in a credit of 0.18.

VIX PO 12152017

Note the dollar risk is fairly high compared to the reward, but this does require VIX settlement, in the middle of the holidays, to come in at 14.00 or higher.  Some trader believes things in the markets will remain pretty calm between Christmas and New Years and the availability of VIX Weeklys allows them an easy way to try to capitalize on that outlook.

Weekend Review – Volatility Indexes and ETPs – 12/17/2017

Friday was a huge day for US stocks with broad based indexes rallying nicely.  The result was pressure on the SPX related volatility indexes which pushed them from up on the week to having a losing week.


Friday’s price action put pressure on the long ETPs and pushed the short ETPs (XIV and SVXY) to even higher levels.  Both have now more than doubled in 2017.  VVIX remains elevated which indicates the VIX call buyers haven’t completely gone away.  TYVIX managed to close at an all-time low on Friday as we got past the FOMC.

VXX Table 12152017

A large number of volatility indexes quoted by Cboe dropped last week.  Two individual stocks (GS and IBM) and VVIX were the only gainers.

Vol Index Prices 12152017


On Friday there was one trader that appears to be looking for a volatility event this coming week.  With UVXY at 10.62 they purchased 100 of the UVXY Dec 22nd 14 Calls for 0.11.  In order for this trade to make money at next Friday’s close UVXY needs to rally about 32.8%.  I’ll discuss this a little further below the generic payoff diagram.

UVXY PO 12152017

I’ve been doing some work on all the volatility linked ETPs and have calculated the rolling 5-day performance for these products going back to inception.  For UVXY I broke things out into 5% performance buckets and a bar chart representing this appears below.

UVXY 5 Day Performance Distribution - Marked Up

Note on the right side of the diagram I highlighted all instances where UVXY was up 35% or more (which would result in a nice trade outcome for this call purchase).  It turns out that despite 32.8% being a pretty large number, about 4.7% of 5-day performance observations resulted in a move of 35% or more.  I’m not saying this trade will work out, but about 1 out of 20 times in the past the UVXY price action has resulted in this sort of short term out of the money call purchase resulting in a profit.

  • Categories

  • Recent Comments

  • Tags

  • Subscribe to
    VIX Views
  • Contributors


  • Quick Links

  • Blogroll

  • Follow Us

  • Archives