The S&P 500 moved up a little last week and the volatility curve moved lower. On the shorter dated end of the volatility term structure chart, there was the three day weekend effect which helped push VXST and VIX a tad bit lower than would be expected in front of a normal two day weekend. Just for the heck of it, I took a look at the curve 52 weeks ago and added it to the diagram below. I expected the 2015 pre-Memorial Day weekend curve to be higher than the 2014 version, but was surprised at the magnitude of the difference.
Other items of note in the volatility world include TYVIX which was unchanged on the week despite a ½ point drop in June T-Note futures. Long volatility oriented ETPs continued to get hit and VXX is actually down 40% for 2015. UVXY lost 13.74% for the week as the fund experienced the fifth reverse split since inception in 2012. More about that reverse split appears after the performance table below.
UVXY underwent a change last week with a 1 for 5 reverse split effect on Wednesday May 20th. This means there are three different types of UVXY options available for trading. For more information on the specifics of the spilt and how the options that are left over from the previous split were impacted you can visit the link below –
I heard a lot of “what does this mean?” with respect to the UVXY split and then answer isn’t all that exciting. Basically it means that the good people at ProShares decided it was time to reverse split several funds, not just UVXY. In fact more than a dozen funds that ProShares offers had reverse splits last week. Despite the date being fairly arbitrary, I did run some numbers because that is what I do. The table below shows the S&P 500 performance for 10, 20, and 30 trading days starting with the day UVXY experienced the reverse split. I admit most returns on the table are positive, but keep in mind the S&P 500 is up over 50% since the first UVXY split back in March of 2012.