I always lead off this blog with a chart showing the week over week change in the four volatility indexes based on S&P 500 Index (SPX) option pricing.  Just for the heck of it I took a look at what the VXST – VIX – VXV – VXMT curve did this time last year when we also experienced a rate hike.  On the left below is last year’s price change and on the right is what happened last week.  It is like night and day, in fact based on week over week changes in implied volatility one would never think there was an FOMC meeting let along a rate hike last week.

vxst-vix-vxv-vxmt-2015-next-to-2016

Equity markets and related volatility indexes and instruments were pretty tame last week.  Even TYVIX dropped after we got the rate hike behind us, even though the indication from the language pointed to three more hikes in 2017.  I took a quick look at the CME Group’s Fed Watch Tool and as of Friday the markets are showing the next hike is expected on June 14, another on September 20, and the odds are very close to 50 / 50 for a third hike on December 13 next year.  So for now the market is expecting two and a half rate hikes.

vxx-table

The volatility related ETPs continue to work toward the end of the year where short volatility has ruled (since February) and long volatility funds have been hurt (again since February).  Personally, I’m looking forward to starting this chart over in a couple of weeks.

vxx-svxy-uvxy

Venturing into all things volatility by checking in on the twenty nine volatility indexes quoted by CBOE shows that there were markets that experienced a rise in option implied volatility last week.  Looking at the top four on the list below it appears that the focus is moving to outside the US with three of the four big gainers being currencies and the other the CBOE China ETF Volatility Index.

volatility-index-pricing

Finally, a fun trade from the VXX post on Friday.  With VXX at 25.72 there was a calendar spread which may have a variety of potential motivations.  First let’s look at the trade.  Around lunch time someone sold the VXX Dec 30th 26 Calls for 0.97 and then purchased the VXX Jan 13th 26 Calls for 1.66 and a net cost of 0.69.  The payout on December 30th appears below.

vxx-po

As long as VXX is below 26.00 on the last trading day of the year that option will go out with no value.  The alternatives at this point will be numerous, sell the remaining long option, sell a Jan 6th Call or sell a Jan 13th Call against the remaining long Jan 13th VXX Call are all alternatives.