Weekend Review – Volatility Indexes and ETPs – 5/31 – 6/3

The whole curve shifted a bit higher last week. We have to attribute the rise to the three-day weekend effect. At least in the case of VXST and VIX. Typically, VXV and VXMT are not impacted as much as the shorter dated volatility indexes. I might attribute the rise of longer dated volatility to the expected date for the next rate hike being pushed down the road.

VXST VIX VXV VXMT Curve

Despite the rise in VIX last week, the long volatility oriented ETPs were lower on the week. This is a function of the futures dropping as well.

VXX Table

SVXY has recovered nicely from the February lows and is now up over 27% for 2016. UVXY which was up over 100% for the year is now down over 64%.

VXX SVXY UVXY

With volatility up a bit on Friday morning someone came in looking for a long term grind lower in VXX. At least they expect VXX to work lower over the course of summer into standard September expiration. With VXX at 13.53 they purchased the VXX Sep 16th 12 Puts for 1.13 and then sold the VXX Sep 16th 10 Puts for 0.31 and a net cost of 0.82. If VXX is below 10.00 on the third Friday of September, the result would be a profit of 1.18. If VIX remains low for the summer VXX under 10.00 in three months is definitely a possibility. In fact, with VXX closing at 13.02 the execution of this trade appears to be well timed.

VXX PO