This Week in VIX Options and ETPs – 1/31/2014

I have already blogged about one big piece of news regarding VIX Options since that market experienced record daily volume in January with 792,668 contracts traded.  The equity market’s performance definitely helped with the volume record by dropping 3.5% (based on the S&P 500) in January.   Despite the S&P 500 dropping this past week the CBOE Short-Term Volatility Index (VXST – 19.32) dropped over 7%.  The other volatility indexes were all slightly higher.  As always here’s a VXST – VIX – VXV – VXMT curve showing the (unusual?) week over week shift.  The question mark is inserted in there since I consider it a bit different than what I would have expected, but there is not quite enough history to determined what is normal and what is unusual for this curve.

VXST - VIX - VXV - VXMT

The ETP space rocketed up this week with the leveraged long TVIX and UVXY rising around 20%.  That is a pretty interesting one week move when you consider the S&P 500 was only down 0.43%.  Short volatility may be a crowded trade which resulted in strong performance out of the long oriented VIX ETPs.  Speaking of the ETPs – happy fifth birthday to VXX and VXZ.  With all the turmoil this week it slipped my mind, but Bill Luby put a blog up one this topic at his site and to give credit where it is due here’s a link to his post –

http://vixandmore.blogspot.com/2014/01/vxx-and-vxz-now-five-years-old.html

VIX Options ETNs

 

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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