VXST was slightly higher while the rest of the SPX related volatility indexes dropped last week. All moves were relatively small as we have truly entered the summer doldrums, at least for broad based index volatility.
There’s very little exciting on the table below. TYVIX bumped up slightly, but is still at very low levels. VVIX remaining over 80.00 is interesting as traders may continue to take advantage low VIX to get long volatility exposure through buying calls or spreads that put some upward pressure on OTM calls.
We are at almost the mid-point for 2017 and short volatility has ruled the year. SVXY is up over 80% while VXX is down a little over 50%. When a fund loses 50%, you need a 100% gain to get back to flat. Don’t count VXX out for the year as the underlying index gained over 100% in October 2008. I’m not predicting that sort of action again this year, but just noting it has happened in the past.
I mentioned equity index volatility was tame, but that doesn’t mean all volatility was boring last week. Headline price action in the oil market resulted in nice gains for OVX and VXXLE. VXGS was the leader of the pack last week which I’m going to attribute mostly to earnings, but also to some bullish option activity that keeps popping up in the financial sector.
Any strength in VXX this past week came on Tuesday. Mid-day VXX was around 12.95 and a bear put spread was executed when the VXX Jun 23rd 13.00 Puts were purchased for 0.31 and the VXX Jun 23rd 12.50 Puts were sold for 0.07 resulting in a net cost of 0.24.
This trade was nearly perfect as VXX finished the week at 12.54, just 0.04 above the short strike. Of course, it is very possible our trader exited this position early, but even if that were the case I bet they were happy with the outcome.