This Week in VIX Options and ETNs

This past week was a headline grabber for my favorite market indicator – VIX. With almost a 20% move on Wednesday and a little follow through on Thursday, which temporarily put VIX over 16.00 during the day, VIX got the love that it was losing sitting around in the low teens. Near dated call buyers came out and picked their spots Wednesday, Thursday and Friday with orders being spread across the March calls with strikes in the high teens. Premiums are pretty low (under 1.00) even though the options don’t expire until March 20th which gives plenty of time for more upside in VIX if the stock market resumes its recent drop. Friday took VIX under 15.00 and next week will tells us if the move up in stocks is one of those bear market rallies or a resumption of the bull market. Many VIX call buyers are hoping for the latter.

In the ETN world VXX showed a little life gaining a little over 2.00% on the week. The farther dated VXZ ETN was the only long volatility fund that showed a drop last week. This VXX – VXZ relative performance is a poor man’s way of watching the VIX curve. When VXX goes up and VXZ under performs or drops, that’s a flattening of the curve. The iShares MSCI USA Min Volatility Fund (USMV – 31.13) had a nice week considering stocks were lower as did the PowerShares S&P 500 Low Volatility Portfolio (SPLV – 29.61).

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