Weekend Review – Volatility Indexes and ETPs – 4/25 – 4/29

The weakness in the S&P 500 last week, although not really dramatic, did result in pretty big moves out of the four S&P 500 related volatility indexes. They were coming off pretty low levels which attributes to the large moves, at least on a percentage basis. The curve remains steep, which indicates the market remains concerned about whether stocks can move to the upside this year.

VXST VIX VXV VXMT

On the table below VVIX continues to stand out finishing the week over 90.00. Two weeks ago TYVIX had a big push to the upside and remained in the mid-5 range despite the ten-year futures not moving too much.

VIX Table

Of the three VIX related ETPs that I follow the closest, SVXY is the only one in the green for 2016. This choppy year has made it difficult for any of the three strategies to gain any traction.

VXX UVXY SVXY

Mid-day on Friday a trader came into the VXX arena at CBOE with an outlook that we should see some sort of volatility spike in the next three weeks. With VXX at 17.01 they sold the VXX May 20th 17.00 Puts for 1.30 and bought the VXX may 20th 15.50 Puts for 0.52 and a net credit of 0.78.

VXX PO

The break-even on this trade is 16.22 while the best case scenario involves VXX over 17.00 at expiration. Since VXX tends to spike with a move in the VIX futures and then grind lower afterward some sort of quick move up in VXX is most likely what the trader is looking for in this case.