With the drop in the S&P 500 last week the market continues to be on edge.  This is reflected in the uniform move higher in the VXST – VIX – VXV – VXMT curve from last week.  Note the ‘bump’ remains on the VXV data point which represents 3 month implied volatility.  This time frame is the first on the chart below to come after the last two Fed meetings in 2015.  It will be interesting to see if a change in the shape curve coincides with the approach of the next Fed meeting which concludes on October 28th.


VXX and UVXY (along with the other long VIX ETPs) didn’t participate to the upside as much as holders would have hoped.  As is typical, this is the result of the futures not rising as much as VIX.

VXX Table

Finally, here are a couple of trades from Friday in VXX.  One bullish and one bearish.  With no preference (I actually flipped a coin) let’s look at the bullish trade first.  Late Friday with VXX at 25.22 there was a buyer of the VXX Oct 9th 27 Calls for 1.33 who then sold the VXX Oct 9th 33 Calls at 0.41 for a net cost of 0.92.  The best case for this trade involves VXX at 33.00 or higher which is a rise of just about 31% from where VXX was trading when the trade went off.


The bearish trade really isn’t all that bearish, but is pretty aggressive.   Early on Friday when VXX was around 23.73 a trader came in and sold the VXX Oct 23rd 40 Call at 0.23 who then purchased the VXX Oct 23rd 45 Call for 0.13 and a whopping credit of 0.10.  This 0.10 is safe as long as VXX doesn’t rally about 69% between now and the fourth Friday next month.  This risk reward scares me a bit, but upon reflection I find the timing interesting as this is also the last expiration date before the next Fed decision.