S&P 500 volatility rose across the four volatility indexes based on SPX option pricing this past week.  The short side of the equation was up strong and the longer dated indexes (VIX3M and VXMT) had good weeks as well.  It may just be some concern is finally returning to the equity markets.

 VXST VIX VIX3M VXMT 11102017

The long funds had solid weeks with the unleveraged ETPs gaining 3% to 7%, with the big winner being EVIX which is based on VSTOXX futures trading.  The short funds gave up almost the opposite, with the short EXIV fund taking a bit more of a pounding. 

 VXX Table 11102017

There was a lot of green on the board across the spectrum of volatility indexes quoted at Cboe.  The big winners were in the equity space with the 8 of the top 10 movers based on developed equity markets.    

 Vol Index Prices 11102017

In the volatility space we are used to unusual twists on spread trades.  There was on in UVXY this past Friday that would only work for a double leveraged VIX related ETP.  With UVXY at 16.12 Friday there was a seller of 125 UVXY Dec 15th 37 Calls at 0.62 who then bought 125 Dec 15th 12 Puts at 0.45 and a net credit = 0.17.  Yes, the upside call strike is just over three times higher than that of the downside put strike for this risk reversal.  The payoff at expiration on December 15th appears below.

 UVXY Risk Reversal

So for this trade to be in danger UVXY needs to rally about 130% over the next five weeks.  For the trade to do better than the 0.17 credit UVXY should drop by about 25%.  Both are possible with recent history leaning toward UVXY breaking 12.00 before hitting 37.00 (of course that assumes no reverse split between now and December 15th, but even in that case the options would adjust accordingly).