VXST closed at an all-time low on Thursday based on a strong equity market and a three and a half day weekend. The weekend effect for volatility indexes relates to the indexes being calculated using calendar days. In the case of VXST the measurement is nine calendar days. When there is a three day weekend there is more of a headwind for VXST and the result is usually VXST losing value the day before the holiday weekend. The very consistent part of this mini-story is that VXST has always risen the day after a long weekend – I’ll follow up on Monday in this space with a longer explanation after we see what VXST does.
The VXST curve is pretty normal for such a low level of the spot index. Of course the July 9th contract is at a premium, but a portion of that premium is reflecting an expected rebound in the index on Monday. In the option space significant open interest exists for the July 9th 9.50 Puts, and July 9th 15, 16, 17 and 20 Calls. Something that caught my eye is open interest of 2,000 contracts for the July 16th 22 Calls. July 16th is also the settlement date for July VIX options. This makes me wonder if this 2,000 lot is part of a spread trade that incorporates a VIX instrument – I’ll do some digging on Monday to see if that is the case.