This Week in VIX Options and ETPs

The S&P 500 was higher early in the week and then backed off some on Friday. This market strength in the beginning of the week could be attributed to solid earnings reports. Weakness on Friday was attributed to the emergence (for the umpteenth time) of concerns about the economic situation in Europe. The VIX behaved as expected losing value early in the week and rebounding with a drop in the S&P 500 on Friday. The VIX traded down to the low 15’s before settling the week at 16.36. This was the lowest VIX since late March / early April.

On the option front attention quickly moved from July to August option trading. July options expired Wednesday morning with a settlement price of 16.76. Even before settlement traders commented on August option activity. The previous week, many long call positions that expired in July were being rolled out to August. Demand for August calls held up with net buying in calls with 23 through 28 strike prices and August expiration.

The VIX related ETN’s were a mixed bag. The VXX made an all-time low at 12.50 during the day on Wednesday. It did manage to recover to 13.20 on Friday long with the strength in the VIX and VIX futures contracts. TVIX followed suit, also making a historic low this week, but rebounding to 3.43 (up over 8% on the day) on Friday.

Although the VIX Index lost value on the week – the inverse ETNs did not manage to gain much. The XIV was up 0.24% and the SVXY gained only 0.33%. This slight gain for the two inverse VIX exchange traded products I track was surprising as the VIX lost 2.51% on the week. Sort of an outlier on the long side was the VXZ which was up slightly for the week. The gain may be attributed to the focus of the VXZ which is farther out on the futures curve. The futures contracts on the VIX expiring in the fall did not drop much at all despite weakness in the index. The result was a VXZ that managed to gain a bit on the week.

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