Last week the S&P 500 was strong and volatility indexes were weak. I have been focusing on where the VXST – VIX – VXV – VXMT term structure curve has been in 2015 compared to the averages last year. For the first time in a while VXV dipped below the 2014 average with only 6 month SPX implied volatility still higher than the 2014 average so there may still be a little long term concern about the equity markets looming. Over the near term VXST under 10 and VIX back to the tweens indicates complacency abounds.

VXST - VIX - VXV - VXMT Curves

The long ETPs took it on the chin with VXX down over 11% and the leveraged funds losing over 22%. The inverse funds managed to outpace the drop in VXX rising over 12%. I expect that the volatility tourists may be attracted to XIV and SVXY both up over 28% this year.

ETN - Indexes

Since there was weakness in the long oriented ETPs last week, revisiting a bearish volatility trade and looking at a new one.

Back on March 20th in this space I pointed out a large purchase (over 100,000 contracts) of the UVXY Jan 2017 9 Puts at 3.90. At that time UVXY was at 15.26 and the break even price at expiration is 5.10, a drop of about 75%. Since then, in just three weeks, UVXY has lost 5.04 or 33%. This trade looks good so far as the bid side of the UVXY Jan 2017 9 Put was 5.00 (up 1.10) on the close Friday.

Another similar trade occurred on April 10th involved a long dated put on VXX. With VXX just over 22 there was a buyer of 12,000 VXX Jan 2016 20 Puts at 3.35. The payoff diagram below highlights where VXX closed on Friday along with how far the fund needs to drop (24.7%) for this trade to make it to break-even. Like the UVXY trade, I plan on keeping an eye on the progress of this long term bearish view on VXX.