This past week the S&P 500 rose to levels not seen since 2008 and VIX reacted as volatility traders would expect with a drop down to 14.38. This is a drop of over 17% on the week. As VIX futures followed the spot index lower the exchange traded products that are long volatility were down on average over 20%. The worst performers were the TVIX and UVXY which are leveraged to the long side. Both dropped over 30% on the week. As a side note, in case the price looks fishy, UVXY had a reverse split on the week. VXZ which is comprised of VIX futures expiring farther out on the curve held up the best only losing 8%.
On the flip side the short VIX exchange traded products were both up around 20% benefitting from the drop in near month VIX futures. Finally the hedged EEMV and USMV were both higher benefitting from a rise in their core markets.
Even with a 17% drop in VIX there was not many large orders of interest hitting the VIX option pit on this holiday shortened week. The result of little buy interest was VVIX moving down to the low 80’s. VVIX is a good indication of the implied volatility of VIX index options. The historic normal range for VVIX is between 80 and 120 and a reading of 82.24 puts VVIX much closer to the cheap end than the expensive end. That combined with VIX quoted under 15 did not bring on any bargain hunters to speak of late this week.