We experienced the biggest one week drop in two years last week for the S&P 500. The result was the type of moves we haven’t seen in S&P 500 related volatility indexes since August 2015. We got a 67% gain for VIX last week, with VIX3M gaining 46% and VXMT was 32% higher. The result was steep backwardation [in what? VX futures, S&P implied?] that is normally associated with near term concerns about the direction of the stock market.
There’s lots to talk about on the table below. Ten-year futures hardly budged, but TYVIX closed over 6.00 for the first time since April 2017. Keep in mind the long term average for TYVIX is 6.43 with history going back to 2003. VVIX [SW1] levels set an all-time record high twice last week closing at 177.34 on Monday and then 180.61 on Thursday. The previous record was 168.75 on August 24, 2015. The short volatility linked ETPs got a lot of attention last week as SVXY and XIV were under extreme pressure. XIV triggered an acceleration clause and the ETN will be retired this week. SVXY is still available for trading after giving up almost 90% last week. After Monday’s dramatic drop SVXY had $97 million under management. The NAV increased enough for SVXY to recoup $272 million, but the ETF now has $778 million which means despite the performance last week, money has flowed into SVXY. Finally, what was bad for the short funds benefitted the long funds with VXX gaining over 50% and UVXY rising almost 70% last week.
Finally, every volatility index quoted by Cboe Global Markets rose last week. Not a surprising result considering the week we all just went through.