Weekend Review – Volatility Indexes and ETPs – 10/10 – 10/14

On a percentage basis VIX was the big winner among the four S&P 500 related volatility indexes.  VIX gained just over 19% while VXST was up about 13%.  The longer end of the curve is often less responsive to drops in the stock market.  VXV and VXMT behaved as they normally do and rose about 6% and 4% respectively.

vxst-vix-vxv-vxmt

The long ETPs had a nice week with the unleveraged funds gaining over 5% and the leveraged funds putting up gains of over 10%.  As I like to say, the funds did what they are expected to do when volatility moves up.  Do note that even the leveraged funds underperformed VIX as I now have another teaching example showing that VXX is not VIX.

vxx-table

Despite the gains in VXX and UVXY, the year to date performance for both funds continues to leave something to be desired.  SVXY which came under pressure last week gave up some ground but anyone that is up 40% this year should be very satisfied with that result.

vxx-svxy-uvxy

VIX also was the strongest upside performer relative to the 29 volatility indexes quoted at CBOE.  Most of the leaders were equity market related, but something that stood out to me was EUVIX and BPVIX gaining last week.  BPVIX has been up strong three consecutive weeks.  It may just be that the market doesn’t think the current drop in the Pound is over.

vol-indexes

Since Halloween is just around the corner I’ve decided to point out a trade that would scare the heck out of me.  On Thursday morning, about an hour into the trading day, with UVXY around 18.75 someone came in and sold a strangle using the Oct 14th options.  Specifically, they sold the UVYX Oct 14th 17.00 Put for 0.08 and the UVXY Oct 14th 22.50 Call for 0.12 resulting in a credit of 0.20.  The payoff as of the close this past Friday shows up in the diagram below.  Note there’s no protection so a big move up or down (which happens) in UVXY could have been disastrous.  Luckily for this trader UVXY finished the day at 17.58 and both contracts expired with no value.

uvxy-po