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The December "kink" in the VIX futures term structure is a consistent feature, visible most years. The August 9th term structure chart below clearly shows the kink for this year. What I didn't know was the expiration dynamics of the VIX December future are unusual too. In "non-fear" markets (VIX/VIX3M < 0.95) VIX futures usually have a significant premium over the VIX index value until very close (e.g. 1 day) to the future's expiration. For the December expiration, however, that premium typically goes away much sooner, essentially gone with 5 days to go. The other chart shows the December future value ("M1") divided by the VIX value with 5 day's until expiration per year, compared to the average of that metric for all the months of that year. That average shows a typical premium of around 4% with 5 days to go. The low VIX readings in December are probably due to a combination of typical low realized volatility in December and calendar effects on the annualization of the VIX metric, but the decay dynamics of the December VIX futures are unusual too. My rule of thumb on these sorts of things is that weirdnesses such as these are due to market makers and other smart players preventing arbitrage opportunities, rather than being arbitrage opportunities. For more on how the VIX works see https://t.co/Yr97lGQ5az

As anticipated, Volatility Shares did pick up a few OTM $VIX options today, 15,400 of them, 20-Dec-2023 Calls with a strike price of $27. They paid somewhere between 0.3 & 0.35 for them, let's say 0.33, so ~$500K total. I don't much trust the Greeks that Fidelity/Schwab show, but lacking more reliable ones, the delta shows as ~0.122 , & implied volatility (IV) at ~125 The $VIX December future, not quite the underlying, but close enough, closed 13-Nov at $15.95. The notional markup on the futures is 1000X, so each contract is worth $15.95K, the notional markup on the options is 100X, so 1/10th the notional of the futures. Volatility Shares was showing short 9890 Dec contracts on 13-Nov-23, so the 15.4K VIX options are in the neighborhood of 15% of the futures notional, with a beta of .122 so ~1.8% hedge with things are they are (assuming my math is right). The value of a position like this is when things get bad, the VIX future will jump big time and the implied volatility of the calls will also jump too--the combination providing some serious juice from the VIX calls. If the market doesn't have a big panic, my guess is we'll start seeing around 5% per trading day roll of those calls to the $27 strike 17-Jan-2024 calls. If the VIX does spike, and the calls jump in value, then things get interesting. Rolling to the same strike would be expensive, so it might make sense to roll to higher strikes, perhaps even harvesting some of that premium. Velocity Share's announcement https://t.co/nI9wnnvRaF My previous "X" on possible rationale behind VS's move https://t.co/SWLRD9x5PK