It's probably a "slap-the-forehead" easy one, but for some reason I'm just not seeing it, so can someone 'splain it to me please? From Fidelity quote at 10:55 PST: Vix @ $23.15 Jan 21 2015 10 Call @ $11.6/$11.8 Bid/Ask Jun 17 2015 10 Call @ $10.2/$10.4 Bid/Ask Jan Option value + strike = $10 + $11.7 = $21.7. I would have thought that DITM options near to expiration would track the underlying fairly closely but it appears they are underpriced here ($21.7 vs $23.15). I'm under some sort of fundamental misconception here but I'm just not seeing it. I believe VIX options are European style but not sure if that makes any difference. Thankx,
Vix options are priced vs. the VX future not the index. I'm not in front of a screen right now but I'm guessing the future for that month is lower than the index.
Thanks Robert, that explains it. I was looking at the Index and not at the appropriate month futures contract. The January future was trading about $2 lower than the index. In fact, in the CBOE guide on VIX futures/options mentions that specific scenario on page 32. https://www.interactivebrokers.com/webinars/Trading_VIX_Futures_Options.pdf Thanks again for your help.
Rmorse is right. mate, dont trade calendar on VIX Call, just dont. you gonna loss your pennies. Vix Put is much more likely to work on your side