VXST got a little bump based on the drop in the S&P 500 and a potentially market moving event going on this weekend in Italy. Rising 30% is impressive, but the move was off a pretty low base. The rest of the curve moved higher as well as all volatility indexes based on S&P 500 Index option pricing had been under pressure since the election.
TYVIX is where the volatility is at these days. Although the measure of 10YR US Treasury Note volatility was up only about 2%, being near 7 places TYVIX well above the average for 2016 and near post-election highs. The short VIX related ETPs gave up some of the great post-election run and the long funds recovered slightly. Finally, VVIX near 100 is something to keep an eye on as the VIX of VIX has been a good leading indicator for overall market volatility this year.
For the year SVYX is still up over 60% despite the 4% drop last week. On the other end of the ETP spectrum VXX and UVXY both had good weeks, but at this point it takes a lot to move the year to date needle.
Checking in on all 29 volatility indexes quoted at CBOE the gainers were dominated by equity market related volatility. Using a Wall Street phrase, this may be a dead cat bounce, since that sector of volatility has been under pressure for the past couple weeks. At the bottom of the table, I was not terribly surprised to see OVX since OPEC seemed to come to some sort of resolution last week. Whether it holds is another story.
Finally a fun trade I found that made me do some math. Just after the official equity market close of 3:00 pm Chicago time there was a buyer of 4500 VXX Dec 9th 32 Calls for 0.42 who sold 5000 VXX Dec 9th 35 Calls at 0.18 (actually a small amount was done at 0.19 – but this is difficult enough without throwing that in here). The result, was a ratio spread that bought 9 VXX Dec 9th 32 Calls for 3.78 who sold 10 VXX Dec 9th 35 Calls for 1.80 and a net cost of 1.98 per 9 x 10 spread. The payoff at the close this coming Friday is shown below.
Things go parabolic to the upside from 32 to 35 and then ease off until VXX is well over 60 before a volatility spike turning into a loss on this trade. I always say volatility traders come up with unique payoff structures to lower the cost of getting some long volatility exposure. This one ranks up there with the more unique trades I’ve seen in some time.