The S&P 500 put up the biggest gain in almost two years last week. This put a little pressure on volatility indexes that are based on S&P 500 index option pricing. Saying a little pressure is just being modest. The term structure change below is about as dramatic as it gets for a one week move to the downside.
I did not have to look too far down the performance table to see a red flag with respect to the equity market performance. The implied volatility of VIX options remains high despite the drop in VIX. This means there is still some demand for protection against and equity market drop a subsequent spike in volatility or VIX. VVIX finished out the week over 104 well above the 2014 average of 80.
The long volatility oriented ETPs such as VXX took quite a dive while the short funds recovered from their recent dramatic drop. VXX managed to rise 30% over the past few weeks and offered a nice short term return as the stock market was under pressure, but quickly gave a good portion of that performance back with the stock market showing strength this week.