The VXST – VIX – VIXM3 – VXMT curve was mixed with VIX rising but the other three S&P 500 related volatility indexes lower on the week.
On the summary table, SKEW and VVIX stand out as indications that risk is lurking around the markets. As a perspective, we have SKEW data going back to 1990 and Friday’s close places the index higher than 99.11% of all observations. The long-term average (going back to 2007) for VVIX is 87.71, which places Friday’s VVIX close higher than average which is interesting considering Thursday was an all-time low closing low for VIX. It may be VIX option buyers consider long volatility exposure cheap based on VIX and not the volatility of VIX options.
This past week was a teaching moment as VIX rose, but the long oriented VIX ETPs were lower. VXX lost over 5% and now is down over 62% on the year. UVXY lost over 10% last week which puts the two times long VIX related ETP down almost 90% for the year.
Despite the low level of VIX, volatility quoted by CBOE were mixed with fourteen down, fourteen up and VXEFA unchanged on the week. We are going into earnings season which should put some upward pressure on the individual stock volatility indexes as well as VXXLE and VXN which have heavy weightings toward just a few stocks.
Finally, VXX bulls had some hope on Friday afternoon as the long VIX Futures ETN moved over 38 for a very short period of time which was a move of about 2.5% to the upside. Astute traders who were not at lunch were able to take advantage of this quick pop in VXX. I usually discuss spreads in this space, but a nice trade I came across was pretty basic. With VXX at 37.77 there was a buyer of the VXX Oct 6th 38.00 Puts for 0.37. Based on the close Friday this option settled in the money by 0.90. A potentially nice return for a four-hour option trade.