This Week in VIX Options and ETPs

The S&P 500 and VIX were fairly quiet early in the week which action picking up toward the end of the week. VIX for the second half of the week was a grind to the upside as nothing seems to be getting done in Washington, DC to avert the fiscal cliff. VVIX was also strong toward the end of the week indicating demand for VIX options. This sort of demand usually moves in sync with a higher VIX when traders are looking for some equity market protection through the purchase of VIX Call options. 

VIX This Week –

In specific option trading there was some rolling from December to January occurring even though December expiration is the week after standard expiration this month. On Wednesday there was a buy of 25,000 VIX Jan 25 Calls as a trader took advantage of low VIX and VVIX. The January 25 Call is a very popular contract as the open interest is near 400,000. Later in the week there was some interesting activity in the March, April, and May Put options, specifically on the 16 and 18 strike prices.

Volatility related exchange traded products behaved as expected last week. The shift in the curve probably gave VXX and other near dated futures related ETPs a little extra boost. As long as December is trading at a very slight discount to January (16.85 vs. 17.20 as of Friday’s settlement) these ETPs will not have the normal extra pressure of contango as a headwind. Emerging markets were up last week which aided the performance of EEMV versus the other low volatility funds.

VIX Options and ETPs.jpg