This Week in VIX Options and ETPs

With July VIX expiration coming up next Wednesday there were several rolling transactions hitting the pit. The one that caught my eye involved rolling a long position in the July 26 Calls out to August 26 Calls. On Monday 15,000 VIX Jul 26 Calls were sold and 15,000 VIX Aug Calls were bought for a net cost of 1.10. On Wednesday another 15,000 26 Calls were rolled from July to August at a net cost of 1.16. Another smaller July – August roll was in the 32.50 Calls. 4,000 VIX Jul 32.50 Calls were sold and the same number of VIX Aug 32.50 Calls were purchased at a net cost of 0.70. 

The VIX has been trading at relatively low levels and it appeared some institutions may have been taking advantage of these low levels and buying longer dated out of the money calls to get some tail risk protection. For example 3,000 on Monday 19,500 VIX Aug 60 Calls traded, and on Thursday 7,500 VIX Dec 70 Calls were traded.

Finally, early in the week there appeared to be several short term bullish trades selling July VIX Puts. With the VIX down around 17.00 on Friday and only two trading days left to expiration there may have been some losses being taken on these short puts. There was volume in the July 17, 18, 19, and 20 Put options that appeared to be attributed to a higher outlook for the VIX (and lower stock prices).

In the exchange traded product (ETP) arena I have started monitoring the performance of some of the more liquid exchange notes and funds that investors can use to gain exposure to volatility. These ETPs have been segmented by general strategy – long, hedged, and short. 

With the VIX and VIX futures under pressure at the end of the week ETPs that have long exposure to S&P 500 volatility were under pressure as well. The hedged instruments combine volatility exposure and market exposure. Both were up slightly on the week. Finally, the two liquid ETPs that get short exposure to volatility were up strongly on the week.