Yo Pit Crazies, 

If you want to see something interesting in options markets,  take a look at the VIX futures curve. 

When you learn how to read the curve, it will change your trading. You can use it to hedge, speculate or create trades that pay in either direction.

The best part is grabbing positive time decay from a long option.

What’s that I say? It’s true.

VIX Underlying Is Not the VIX Cash, But the VIX future

Now, VIX cash is the underlying sometimes – but only for 1 day a week on VIX expiration when the options settle.  

That brings into play a whole host of opportunities, as the VIX futures can move far away from the current VIX price.

Right now look below and see the VIX June future right on top of the cash. This means the VIX June future will follow the cash price closely in the short term. That is not normally how it goes.  Usually it takes a whole expiration cycle for VIX futures to get to the cash.

Look at the July future in VIX trading 28.06. The underlying price of the future is trading way over the cash price. That means VIX puts will trade a little cheap since the higher the underlying goes, the cheaper puts get.

I can now “spend” that intrinsic value on something else, say a SPDR S&P 500 Trust (Ticker: SPY) put.

It is a nice trick to have in the arsenal of trading.

More to come on this soon …

To Your Trading Success,

AG