The S&P 500 closed at an all-time high (yawn) on Friday, but the volatility curve shifted higher as well. Volatility indexes levels are relative and VXST, VIX, VXV, and VXMT are all at very low levels. Theoretically these indexes can go to zero, but they have levels where it becomes difficult for implied volatility to go much lower. That’s where we are right now for the four volatility indexes that derive volatility measures from the S&P 500. Hence the slight moves higher even with the S&P 500 achieving a new record.
In the ETP space the long oriented funds suffered a drag from the June VIX future which was down over 4%. The June contract had a bigger influence than July this past week. The weighting is always shifting and come Monday morning June will be about 60% of the fund and July will comprise around 40%. By next Friday July should be the heavier weighting for VXX and the other funds.
Speaking of VXX there was a trade that popped up on Thursday that caught my eye. Late in the day there was a buyer of over 5,000 of the VXX Jun 32 Puts @ 0.36. VXX finished Thursday at 33.64 and this trade appears to be based on the outlook for a low VIX and a constant drift lower for the June and July VIX futures contracts over the next couple of weeks.