Of the four volatility indexes on the term structure chart below two have been around the longest.  Of course VIX with the other being VIX3M (formerly known as VXV).  The relationship between the 1-month volatility index and 3-month version usually has VIX at a discount to VIX3M.  Friday this relationship flipped for the first time since April of last year.  It is considered a sign of fear being ‘overdone’ when VIX is higher than VIX3M.  We shall see next week if the fear is overdone or not.


TYVIX is still elevated, but lagged the equity volatility moves last week, even with a 1% drop in TY futures.  Note VVIX and SKEW both strong in sync with the VIX move from last week.  People are still paying up for protection against a bigger drop in equity prices through purchasing OTM SPX puts or VIX calls. 

VXX Table 02022018

The volatility space was mostly green last week, individual stocks and a couple of currencies were the only losers.  

Vol Index Prices 02022018

Late Friday VXX was at 32.92 and one trader decided we won’t see massive follow through to the upside in volatility next week.  They sold 200 VXX Feb 9th 40 Calls for 0.57 and purchased 200 VXX Feb 9th 52 Calls for 0.18 resulting in a credit of 0.39. 

VXX 02022018 Payout

The short strike (40.00) is slightly more than 20% higher than where VXX was when this trade was executed.  VXX has been around for 470 weeks since launched in early 2009 and it has rallied more than 20% only 14 of those weeks.  We’ll see this time next week if next week is the 15th 20% plus rally or not.