The four volatility indexes that are based on SPX option pricing were all higher last week with VXST leading the charge. Of course, the VXST move was aided by a rebound from depressed levels that can be attributed to two three day weekends between the index calculation and the two option series used to determine the level of VXST.
The VIX futures markets were mixed last week with nearer dated contracts gaining and longer dated futures losing value. The result is a mixed back of volatility linked ETP performance. Do note VVIX is now over 100 and SKEW is elevated as well. (using my Ancient Aliens voice here) “Could it be volatility markets are bracing for the new year?”
Along that same line of thinking, all but three of the volatility indexes quoted by Cboe Global Markets were higher last week. Two of the three losers were interest rate related joined by VXGS (Goldman Sachs).
Late Friday, with SVXY coming under pressure there was a seller of SVXY short dated puts that will end up owning the inverse volatility linked ETF on a dip below 100. Specifically, a trader sold 71 SVXY Jan 5th 100 Puts at 0.50 with 7 minutes left in the trading day Friday and SVXY at 128.60. If SVXY loses a little over 22% next week then the seller of these puts will end up long 7100 SVXY shares at a net effective cost of 99.50.
The payoff diagram above shows the result of the trade on the close January 5th assuming the trade is held through the close. I wouldn’t be surprised if the seller of this put is ok with being assigned on the shares of the ETF since buying on weakness has worked pretty well for SVXY over the past few years.