Despite Friday’s rally, the S&P 500 was down four of five days and gave up about 1.25% last week. At the worst point the S&P 500 was down over 3% on the week and then of course it shook off the dip and rallied to end the week. You can’t keep a good market down nor does it appear can the bears keep this market down either. All four of the S&P 500 oriented volatility indexes were higher for the week. And the curve became slightly inverted.


VXST is higher than the three other indexes even in front of a three day weekend. For those new to VXST, the index is more or less a nine day version of VIX with those nine days representing calendar days. An extra day off like we have this Monday places a bit of a headwind in front of VXST which will recover some of that value on Tuesday morning. Of course the stock market action will dictate just how much of that value is recovered. Something that stood out to me on the term structure diagram above was where VIX is relative to VXV. The slight discount may be partially attributed to the impact of a three day weekend, but regardless of the circumstances VXV higher than VIX is a bit unusual when VIX is up almost 20% on the week.

The long volatility oriented exchange traded notes and funds had a great week rising 10% with the leveraged funds rising about 22%. Both the short dated inverse funds and longer dated inverse fund (ZIV) were lower by 10% and over 4% respectively.

ETPs - Index Table

Finally I want to give a little more love to VVIX which continues to trade at levels above recent and longer term averages. VVIX over 110 indicates demand for VIX options (mostly calls) remains strong which can be taken as concern regarding a stock market drop still being persistent among volatility traders. The chart below shows the daily closing prices for VVIX from the first day of 2014 through this past Friday. For a longer term perspective CBOE has VVIX data going back to the first day of 2007. The long term average for VVIX is just over 86 or about 24 points lower than Friday’s close.

VVIX Daily