A rise of over 2% in the S&P 500 crushed both VIX and VVIX last week. It was just two weeks ago that VIX traded intraday with a 19 handle and is now back testing pre-2008 lows which has been the theme of 2013 for VIX. VVIX is back down to the mid-70s which has been the ‘new normal’ after running up to the mid-90s late last month.
In option trading – the volume in March was in the puts and the volume in April was in the calls. It appears option traders are expecting smooth sailing for the next couple of weeks for the equity market with less certainty in April. For example there was a buyer of 10,000 VIX Mar 13 Puts on 0.25. A couple of big trades that would benefit from a higher VIX between now and April expiration were a big buyer of the VIX Apr 18 / 28 Call Spread at 0.68 and a complex spread where the VIX Apr 11 /13 Put Spread was sold and VIX Apr 16 / 17 Call Spread was purchased for even money.
In the ETP space the long VIX related came under intense pressure. For example VXX lost over 11% posting the biggest weekly loss in 2013. To state the obvious, inverse VIX ETNs did as expected and has a good week with XIV and SVXY both rising over 11%. The low volatility fund space saw higher prices, but these exchange traded funds underperformed their benchmark indexes a little.