Weekend Review of Volatility Indexes and ETPs – 5/28/2017

VXST closed Friday at an all-time low of 7.60 which sounds impressive until you hear that for VXST the history we have to work with only goes back to 2011.  I am going to make a bold prediction and say that VXST will move higher when the market reopens on Tuesday.  Read that as sarcasm as VXST has never followed a three-day weekend without moving higher.

VXST VIX VXV VXMT 526

After having a short period of upward movement, the VIX related funds gave back performance and then some last week.  The short funds resumed the stellar performance of 2017 with VMIN leading the pack by gaining over 10% on the week.  I find it interesting that SKEW, which often benefits from low VIX is not testing the 150’s.  I guess no one needs to mitigate tail risk going into the summer.

VXX Table 526

For 2017 UVXY is now down 75% while SVXY is up a little less than 70%.  There is always a divergence between the leveraged long and short VIX related ETPs, but this divergence is only 5 months into the year.  I may have to conduct a mid-year reset on June 30th.

VXX SVXY UVXY 526

The British Pound was the bright spot for the volatility space this past week, along with AMZN and GOOG.  Oil option volatility was also a bit higher, but otherwise implied volatility was mostly lower.

Vol Indexes 526

On Wednesday May 17th VIX had a short-lived day in the sun and VXX was right there sharing the spotlight.  We all know everything in the markets returned to what has been normal in 2017, but at the time VXX had run to 16.10 from 13.60 in a single day.  As that day came to an end a trader put on what now looks like a pretty smart bear put spread.

With VXX at 16.10 there was a buyer of the VXX May 26th 16 Puts for 0.84 who then sold the VXX May 26th 15 Puts for 0.31 paying 0.53 for a trade that needed VXX to finish this past week below 15.00.  We all know that is how things turned out and if the trader held on through this past Friday they scored a profit of 0.47 based on the payoff diagram below.

VXX PO 526

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

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