This Week in Volatility Indexes and ETPs – 9/26/2014

This is one of those weekends where I get to add a 3rd curve into the mix below. Thursday, as all of us that were not under a rock know, was a hectic day for the equity market. Hectic days in the stock market result in green days for volatility. The purple line below shows the closing VXST – VIX – VXV – VXMT curve on Thursday as well as the week over week curves. Note the change from Thursday to Friday was a pretty orderly one, but also note that VXST remained at a slight premium to VIX. Two thoughts on that premium – 1) traders are still concerned we aren’t out of the weeds quite yet or 2) VXST remained high as this coming Friday is the employment report.

VXST VIX VXV VXMT Curve

The long exchange traded products did what they were designed to do this past week, giving holders nice returns. VXX was up almost 8% which is pretty impressive considering the October futures have over two more weeks until expiration. Of course the short ETPs were both lower, down over 8%. One other week over week change that stands out is the VVIX which finished the week over 90 after getting darn close to 100 on Thursday. This is a measure applying the VIX methodology to VIX options which tends to move higher when there is big demand for VIX calls.

ETN - Indexes

Finally, I came across a pretty interesting trade and profitable trade from Thursday. As we were falling apart and SVXY was trading at 77.46 someone came in and sold some of the SVXY Sep 26th 80 Puts at 3.20. This trade is not a suggestion, recommendation, or for the faint of heart. In this case, the seller benefitted as the stock market firmed up on Friday SVXY climbed higher and finished at 79.90. So an SVXY put that could be sold for 3.20 with just over 24 hours until the settlement price was locked in finished 0.10 in the money.