With the S&P 500 achieving several new highs last week VIX managed to drop back into the tweens finishing out the week at 12.90. Despite making record highs 42 through 45 this week VIX continues to trade at premium to normal levels from 2014 when records are being set.
The curve is pretty darn steep for this time of year. December at 2.05 relative to spot VIX can be taken as a little nervousness still remains regarding the equity market despite higher stock prices. If you think the market is going have smooth sailing to finish out 2014 then you can look at December futures giving you an opportunity take advantage of that nervousness.
Since many traders may be looking to 2015, I’m going to do the same and point out a trade I came across on Friday morning. Looking to February a trader came into the relatively quiet VIX pit on Friday and bought several VIX Feb 18 Calls at 1.92 then selling VIX Feb 30 Calls for 0.62 and a net cost of 1.30. VIX in the 20’s at that time would result in a partial profit and a February VIX settlement over 30 would turn that 1.30 into 10.70.