VIX closed Friday a tad shy of an all-time low while the S&P 500 continues to push higher having gained just over ½ a percent last week.  The curve below does appear steep, but the context of VIX being so low should be taken into account.

One trader came into the VIX pit mid-day on Friday with what could be considered a massive trade.  With VIX at 9.76 and the standard October contract at 13.70 someone came in with a three-leg bullish trade on VIX.  They sold 262,441 VIX Oct 12 Puts for 0.75, purchased 262,441 VIX Oct 15 Calls for 1.45 and then finished things up with a sale of 524,882 VIX Oct 25 Calls at 0.45.  The result is a spread that is short 1 12 put, long 1 15 call and then short 2 25 calls for a net credit of 0.20.  The payoff below depicts this trade at October expiration along with an assumption of how this would work based on different October VIX futures pricing half way to expiration.

VIX PO 07212017

Note the purple line and how it basically returns some sort of profit between the current October VIX future level and about 33.00.  Of course, there are assumptions about IV, etc, that go into the half-way to expiration line, but it shows that this trader got some long VIX exposure while taking in a credit that pays off if we get even a minor volatility event between now and October expiration.

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