The volatility term structure as indicated by VXST, VIX, VXV, and VXMT twisted a little last week with the 9-day and 30-day volatility indexes rising and 93-day and 184-day indexes dropping a little. Near term risk rising may be attributed to the S&P 500 having a couple of scary days last week. Of course as it has been prone to do over the past couple of years, the S&P 500 shook off weakness quickly and regained some upside momentum. It’ll be interesting to see how VXST and VIX react when the S&P 500 finally does not bounce back.
VIX rose slightly and VXX was lower last week. This sort of price action always prompts the question, “Why?” Well the answer is that the performance of VXX is based on the performance of a VIX related strategy which owns the front two month VIX futures contracts. For instance, on Friday VXX was 56.30% July VIX futures and 43.70% August VIX futures. Both those contracts were lower last week which resulted in VXX losing value as well. Conversely, not that SVXY and XIV were higher last week. Those two funds actually have short positions in the respective VIX futures contracts.