That little bump in VXST that shows up on the far left side of the diagram below can be attributed to Friday afternoon activity. VXST rose 0.75 Friday while VIX was up 0.54. Shorter dated SPX option pricing is used to calculate VXST than VIX. It may be the weakness Friday afternoon in large cap tech stocks may have traders worrying about the direction of the stock market over the short term.
Several things pop out at me on the table below. VMAX had a nice week rising 2% and outpacing the other long unleveraged VIX related ETPs. SKEW is fairly high, which with VIX rebounding a bit is a more worrisome reading than when VIX was under 10.00 or working its way down there. VVIX rising with higher VIX is an indication that demand for VIX calls seems to be increasing. Finally, a different theme, but it is interesting to see the weakness in EVIX, which is based on VSTOXX futures, that accompanies the UK election coming to a conclusion at the end of last week.
On Friday the Nasdaq-100 (NDX) was down 1.8%, the S&P 500 was down only 0.08%, and the Russell 2000 (RUT) gained 0.43%. This is a heck of a divergence and this shows up some in the table below with VXN coming in as the leading gainer among volatility indexes quoted by CBOE. In fact Friday was the 9th biggest single day gain for VXN on record. Note the volatility indexes that represent option activity in two big NDX stocks are high up on the list as well. At the bottom of the list is BPVIX followed closely by the other currency related volatility indexes.
VXX and UVXY were both up slightly last week. However, 2017 has been anything but kind to anyone long volatility. On the flip side SVXY up over 70% on the year.
Finally, I came across a pretty interesting SVXY trade from late Friday. With SVXY at 154.26 someone sold 100 SVXY Jun 16th 131 Puts at 1.15. That’s it, a pure sell of put options. Normally I shy away from discussing such trades, but SVXY is a different animal. When you sell puts you get the obligation to buy the underlying. The long term trend for short volatility funds is up, with some bumps in the road. Taking on the obligation to buy SVXY this coming Friday at 131.00 a share means purchasing the fund if it drops 15% or more next week. It is very possible for SVXY to lose 15% in a week or even much more. However, SVXY does make sense as a buy on a drip and this trade accomplishes just that with the result of not buying being a profit equal to the 1.15 credit taken in Friday afternoon.