The Week in Volatility Indexes and ETPs – 5/4 – 5/8

Despite a dip midweek, the S&P 500 recovered to put up a winning week on the heels of the non-farm payrolls report. Friday’s 28 point rally salvaged weekly performance, but this was not enough to push VIX to a week over week loss.  Since January 1990 there have been 178 weeks where the S&P 500 and VIX were both higher. I ran some quick numbers and of those 178 weeks, the S&P 500 was higher the 102 times and lower the other 76 weeks after both moved higher in sync. I was a little surprised there were not more down weeks after both SPX and VIX move higher, but that’s why I run the numbers, to test assumptions and either prove or disprove them.

The curve was hardly changed with VXST dropping and the other three volatility indexes rising slightly from May 1st to May 8th. For fun, and to show something that represents what things were really like for those in the trading trenches, I included the Wednesday highs for VXST, VIX, VXV, and VXMT which shows that for just a little while fear dominated the markets. But this fear dominated for just for a short period of time and as has become the case for years we got back on track.


I added a couple new rows to the summary table below. Just below the equity index space, the week over week change for the actively traded T-Note futures and the TYVIX now have a home. For those unfamiliar with TYVIX, this is a consistent 30 day measure of expected volatility for T-Note futures based on options on that market.  As with VIX, the week over week change doesn’t tell the real story for TYVIX as on both Wednesday and Thursday TYVIX was as high as 6.76 before finishing the week about 20% lower at 5.62.


Despite a lack of major economic numbers in the near future, at least one trader is looking for a quick move higher in VXX. VXX option trading is open until 3:15 Chicago time and just after the close of stock trading at 3:00 a trader came in and bought a slightly out of the money call spread using VXX options expiring this coming Friday. They paid 0.31 for the VXX May 15th 21.50 Calls and sold the VXX May 15th 23.50 Calls at 0.09 for a net cost of 0.22. Below I show the payout for a one-lot, but this trade was done 2,000 times.


The cost was 0.22 with a potential reward of 1.78 if VXX is up about 14% next week.  In the stock world that’s a big move, in the volatility space it is a good day so success for this trade is definitely possible.