This Week in VIX Options and ETNs

On Friday secondary (not the payroll result) economic numbers were the excuse for the market rally which pushed VIX down to 12.90 by Friday’s close. The result of Friday’s action was to put VIX at 0.01 higher than last Friday’s closing price. This was a second week where VIX is green and the S&P 500 is green. VVIX bucked the trend losing about 3 points on the week. Beyond the spot indexes, the term structure of VIX futures is pretty steep indicating those markets do not expect the low volatility environment to hold up. Joe Tigay from The Stutland Volatility Group tweeted late Friday that the VIX futures are pricing in a rise for VIX on Monday. We’ll see if the futures markets get that one right. Next week is a light economic number week and one description of action in the VIX pit was ‘stable’. This is an interesting word for trading pit. The thought behind this statement was that VIX is going to be range bound as long as the stock market continues to grind higher without any unstable days.

In trading action something that stood out on Thursday was a large buyer of 150,000 of the VIX Apr 20 – 25 Call Spread with paper (as they like to say) paying 0.70. With the debt ceiling being pushed out farther dated options are getting love earlier than they normally do. Also, it was noted spread seem to be more common than outright call purchases these days as those hedging with VIX calls or speculating on a spike in volatility are offsetting the cost a little.

With VIX flat the long VIX related exchange traded products actually had a good week. This can be attributed to VIX futures trading up despite the index being flat.

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