Weekly Review – Volatility Indexes and ETPs – 11/30 – 12/4

This week I’m reporting in from Singapore where we are about to open the Asian version of The Options Institute at the Singapore Exchange (SGX).  I don’t have a feel for the market activity from last week, but I can read the numbers and can only imagine what a ride it was for some traders last week.  I added the Thursday close to the VXST – VIX – VXMT – VXV graph that shows up below since a week over week chart just doesn’t do justice to what occurred in SPX volatility last week.


The leveraged long funds got chopped up pretty good dropping more than two times the unleveraged long funds.  SKEW continues to hover around historically high levels and VVIX is higher than one would expect at a 40 point plus rally in the S&P 500 from Friday.

VXX Table

The trade this week is a longer term one, actually using LEAPS, from Friday that appears to expect a grind lower out of VXX in 2016.  Early in the day, with VXX at 18.81, there was a buyer of the VXX Jan 2017 20 Puts for 7.11 who also sold the VXX Jan 2017 13 Puts for 2.61 and a net cost of 4.50.  Note that VXX closed at 18.22 so the trade was well timed on a short term basis.   To break even on January 20, 2017 VXX needs to drop over 17% and just over a 30% drop results in a maximum payout of 2.50.  Anyone that knows VXX knows this is easily achieved over the next 13 months or so.