The VXST – VIX – VXV – VXMT curve does what it normally does on a pre three-day weekend week and got steeper. It’s been a while since I ran the numbers but I’m fairly certain VXST almost always drops before a holiday weekend and then rebounds when we all return to work refreshed and ready to trade.
SKEW below 130 was the first thing that stood out to me on the table below. A quick check and I saw that it had been consistently higher than 130 for the better part of August despite the 2016 average being close to 128. Although at the lower end of this year’s range, VVIX at 81 is relatively high considering VIX finished the week below 12.
With VIX moving lower last week and the futures following the spot index lower the long ETPs had a rough week. What’s bad for VXX and UVXY is good for SVXY which surpassed the 50% performance line for 2016.
Looking across the range of volatility indexes you can see that most markets experienced an implied volatility drop. The outlier was OVX which rose 7% last week. If you are ever trying to find where there may be higher volatility the table below is taken directly from www.cboe.com/volatiltiy
When we see high commodity market implied volatility I always take things to the next step and check out the skew chart from my LiveVol pro platform. Below is a chart of the option skew for October 7th USO options which is the market used to calculated OVX. The underlying finished the week at 10.24 and I think it’s pretty obvious that implied volatility is higher on the downside than the upside.