Last Week’s VIX Action by Russell Rhoads, CFA

The S&P reached the 1500 level and then some this week.  The interesting action is that VIX and VVIX were higher as well.  It’s odd to have the weekly change for all the same color (red or green), but SPX, VIX, and VVIX were all green.   VIX held up in a higher S&P 500 market Friday which was attributed to a next week being a big news week.  Next week consumer confidence, GDP, and employment numbers come along with their being an FOMC meeting.

One of the more interesting trades this week involved a pretty complex spread.  There was a big buyer of VIX Apr 17 Puts and VIX May 22 Calls that was selling VIX Feb 19 Put and VIX Mar 24 Calls to help offset some of the premium.  Also on Thursday there was a buyer of 100,000 VIX Feb 16 Calls which came in as VVIX was around 71.  This buying pressure help push VVIX up to 80 from 71.  VVIX settled Thursday at 76 after a wide range based on VIX option buying.   Usually the front two month options have the most trading interest, however, due to the debt ceiling timing being pushed out to May, May options are seeing more activity than one would expect in late January.   The VIX May 20 and May 22 Calls are already trading heavily.

Upon first glance there was some divergence in the US equity markets this past week as the S&P 500 was up over 1% and the NASDAQ-100 was down about a quarter a percent.  Of course knowing that Apple (AAPL – 439.88) lost 12% on the week and as AAPL is the biggest component in the NASDAQ0100 this weighed a bit on performance.

More divergence occurred between the S&P 500 and VIX along with NASDAQ-100 and VXN.  The S&P 500 finished the week higher as did VIX and the NASDAQ-100 was lower as was VXN.  One possible explanation for VIX is that there is a slew of economic data along with an FOMC meeting next week.  With VXN the explanation of performance may go back to AAPL.  The implied volatility of AAPL was elevated going into AAPL’s earnings this past week and this bled over into the implied volatility of NDX options.  Post AAPL earnings there was a volatility crush in AAPL options and some pressure on VXN.

Finally, the curves both flattened as all VIX and VXN futures finished down on the week.  Although under pressure, VIX futures posted the fourth busiest day ever on Thursday this past week with 184,273 contracts changing hands.

The posts on this blog are opinions, not advice.
Please read our disclaimer for Indices.

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