Weekend Review – Volatility Indexes and ETPs – 5/23 – 5/27

The S&P 500 rally along with the three-day weekend effect pushed VXST to finish Friday below 10.00 for the first time since July of last year. The VXST – VIX – VXV – VXMT curve moved lower and steepened a bit based on the calendar and the strength in the market.

VXST VIX VXV VXMT

Looking at the table below it is like several indexes and instruments are playing limbo seeing how low they can go. VXX and the unleveraged long ETPs lost 10% while the leveraged funds gave up almost 20%.

VXX TABLE

Check in on the ETP performance with the chart below I just amazed to think that UVXY was actually up 100% for 2016 about three months ago. Now the fund is down over 60%. I think there is a lesson on being short volatility in that statement, but I will save that for a non-holiday weekend.

VXX SVXY UVXY Comparison

VXX started out last week in the low 15’s and as the week got underway one trader decided that VXX was probably going to work lower over the course of the week. With VXX at about 15.10 they sold the VXX May 27th 15.00 Call for 0.30 and then used some of those proceeds to purchase the VXX May 27th 14.50 Put for 0.17 for a net trade credit of 0.13. Note on the payout diagram below that I marked the Friday close for VXX of 13.59 to demonstrate how this trade turned out.

VXX PO