The S&P 500 rose about 3/4% to finish the week over 2100. The term structure of volatility shifted slightly high last week, despite the gain in the S&P 500. That’s a little perplexing, until you consider the continued potential exit of Greece from the Eurozone which I hear commonly referred to as Grexit, despite some market watchers claiming the markets have grown tired of waiting for the potential Grexit to come to fruition. I have decided to try to coin a new term around this – Gratigue or Greetigue both have a catchy ring to it.
In the ETP space the week over week changes were very close to unchanged. This lack of price action is the calmest week over week changes I can recall since covering this space.
Sticking with the ‘neutral’ them in the ETP space there was a strangle seller that showed up in the VXX option space. When VXX was trading around 18.10 there was a seller of the VXX Sep 15 – 30 Strangle who took in 1.20. The specific legs sold the VXX Sep 15 Puts at 0.58 and the VXX Sep 30 Puts for 0.62. As always a payout diagram appears below.
As long as VXX is not down more than 24% or 72% higher at September expiration this trade will return some sort of profit. My assumption behind this one is the trader actually hopes for a couple of spikes in volatility between now and September expiration so that the grind that VXX experiences over time does not place the ETP under 15.00 in September.