Betting on contango

This morning I put a credit spread in place, selling  August VIX $15S calls and buying $47.5S calls for a net credit of $18.2.   The underlying for these calls is the August volatility futures—not the VIX itself.  The effective price of the underlying for these options was about $34 at the time.    The VIX was around 42.

Normally the shortest term volatility futures are cheaper than the longer out months, but with the crash they are trading at a least a 25% premium to the September futures.  I’m betting that the current backwardation returns to the usual contango.


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