Weekend Review – Volatility Indexes and ETPs 3/7 – 3/11

Three out of the four S&P 500 based volatility indexes dropped last week with the longer term focused VXMT rising slightly.  I went on a data fishing expedition with respect to weeks where VXMT and the S&P 500 rose, but couldn’t find a definitive patters.  I even looked at the predictive power going out as far as six months and got nada.  I did find out that both the S&P 500 and VXMT have risen in sync 52 times since 2008, which is interesting and a bit surprising, but doesn’t lead to anything else.

VXST VIX VXV VXMT

The S&P 500 up over 1% and VXMT, VVIX, and SKEW all rising last week doesn’t bode well for the market over the long term.  Near term, complacency is ruling the day, but long term concern still rules the day.  At this point, of the three VIX related ETPs I track closely (VXX, SVXY, and UVXY) only VXX is up on the year.  A repeat of last week and it’ll be in the red for 2016 as well.

VXX TABLE

Another week and another low risk short volatility trade to discuss in this space.  Last week I noted an out of the money call buyer who paid 0.05 for some SVXY Mar 18th 50 Calls.  SVXY has a ways to go for that trade to work.  I came across another long trade on Friday that works if SVXY is up by 0.15 or more from Friday’s close at the end of next week.  Part of this 0.15 before we get to break even is due to the trader executing early in the day when SVXY was at lower levels.

SVXY PO

A couple of hours into the trading day, with SVXY at 42.76, a trader purchased 300 of the one week SVXY Mar 18th 40 Calls for 3.30.  SVXY finished the day at 43.15 so things look good so far for this trade.