The S&P 500 posted a slight loss this past four day week and VIX reacted by climbing over 8%. Some, but not all, of this gain for VIX can be attributed to the calendar impact of a three day weekend. For those that are not aware of this anomaly, the spot VIX index is calculated to determine a 30 day implied volatility measure with the 30 days being calendar days. When there is a long weekend it can put extra downside pressure on VIX which then goes away when the market reopens after the long weekend. VIX closed last Friday at 13.57 and opened Tuesday at 13.95 despite the S&P 500 opening slightly higher as well. Wednesday was a particularly tumultuous day that pushed VIX to 15.50. However as the week drug along VIX drifted lower as the S&P 500 traded in somewhat of a trendless manner.
The calendar impact is much more dramatic with respect to the CBOE Short-Term Volatility Index (VXST) which gapped open by almost two points on Tuesday morning. CBOE has historical data compiled going back to the first day of 2011 for VXST and over that time period there have been seventeen Monday holidays. VXST has been higher all 17 of the Tuesdays that have come after a three day weekend. The week over week change for the VXST – VIX – VXV – VXMT curve appears below.
In the ETN space the funds did as expected with the long oriented funds climbing and the short funds dropping a bit. The big news a week or two ago in this space was that XIV had overtaken VXX as the largest of the VIX related exchange traded products. A quick check of their respective websites shows the market cap for XIV at $822 million as of Friday’s close and a market cap of $930 million for VXX as of Thursday’s closing price. Since VXX was higher on Friday and XIV was lower I’m going to make the assumption that VXX has regained the top spot among the VIX ETNs.