Weekend Review of Volatility Indexes and ETPs – 6/18/2017

As the week came to a close VXST which measures 9-day volatility expectations took a dive.  Hence the big drop on the left side of the VXST – VIX – VXV – VXMT diagram below.

VXST VIX VXV VXMT 06162017

TYVIX finished the week below 4.00 which was a first for 2017, but not outside of the long term historical range.  I checked the market expectations for the next FOMC meeting in late July and right now we have a 100% chance of nothing happening.  That much certainty probably justifies such a low volatility expectation.  Skew worked a little bit higher last week and VVIX was little changed which can be considered indications that there is at least some concern about the future direction of stocks.

VXX Table 06162017

The long funds continue to experience a dreadful year in 2017 while SVXY will probably be near the top of many mid-year performance charts in a couple of weeks which always brings new (neophyte) investors into this space.  Of course the first 20% pullback will scare many away at what has historically been the best time to purchase a short volatility fund like VMIN, SVXY, or XIV.

VXX SVXY UVXY 06162017

With a couple of small exceptions the volatility indexes quoted by CBOE were mostly lower last week.  I see no pattern in the mix of indexes that rose so it’s tough to attribute the green changes below to anything other than market randomness..

Vol Index Prices 06162017

I guess the trade below is a version of Monday morning quarterbacking (post-expiration perfect trade fitting?).  The only life VIX really experienced last week came on Monday, which also pushed VXX higher for the day.  As the end of the day approached a trader came in and purchased 100 VXX Jun 16 13.50 Puts for 0.40 combined with selling the same number of VXX Jun 16 13.00 Puts for 0.14 and a net cost of 0.26.  I admitted as I started discussing this trade that I was benefiting from hindsight and we can see this trade was perfect based on where VXX closed Friday.

VXX PO 06162017

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

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