Of the four volatility indexes based on SPX option pricing, only VIX was lower last week. This is the second week where the longer dated indexes (VIX3M and VXMT) rose while VIX was lower.
Despite VIX dropping the long ETPs gained ground last week. This is a great lesson in what these products give you, exposure to VIX futures and both the November and December contracts rose slightly despite the drop in VIX.
Of note on the table below is the majority of green lines versus reddish lines. It’s been rare in 2017 that more volatility indexes rise than drop on a week over week basis.
On Wednesday VXX spent some time above 38 and when the popular ETN was around 38.50 someone came in and decided the move wouldn’t run to the low 40’s through the end of the week. Specifically there was a seller of the VXX Oct 27th 42 Calls for 0.51 who purchased the VXX Oct 27th 45 Calls for 0.26 and a credit of 0.25. The risk here is VXX over 45.00 and a loss of 2.75. However, there wasn’t much danger of this happening as VXX turned to the downside shortly after this trade.