I have returned from a couple of weeks in Asia speaking at CBOE’s First Asian version of CBOE’s Risk Management Conference and helping with the launch of the CBOE Options Institute at SGX in Singapore.  One of the best comments I heard at Risk Management was that when the VIX term structure is flat it indicates uncertainty with respect to the equity markets.  I think this statement translates well with respect to the chart below as well.  VIX, VXV, and VXMT all closed within 0.50 of each other on Friday which places implied volatility of SPX options is elevated and without any directional bias going out six months.


It was a heck of a week for the long volatility funds with VXX rising just over 28%.  I ran some quick numbers and since inception this was the fifth biggest one week gain for VXX since inception in January 2009.  VVIX also stands out at the high end of the long term range.

VXX Table

The table below shows the ten biggest gains for VXX since the fund was introduced along with VXX price performance the following week.  This past week ranks at number 5, but note number 2 was the exact same week back in 2014.  For those curious about how the stock market reacted to finish the year following the week when VXX was up almost 30% in a single week I checked more numbers (it is what I do).  On December 12 last year the S&P 500 closed at 2002.33, but managed to rebound to finish 2014 at 2058.90 or a gain of almost 3%.

VXX Top 10

Since following a large gain VXX was down more often than it rose, I looked at VXX option closing markets from Friday.  With VXX at 23.32, I looked at call pricing to see what selling a slightly out of the money call spread that expires next week would look like.  This would involve selling the VXX Dec 23.50 Call and then combining it with a long position in a higher strike call.  The table below uses the closing bid price for the 23.50 call and closing ask markets for the higher strikes.

VXX Trades