On a week over week basis the S&P 500 was down fractionally. One would not assume such a small move from SPX when looking at the VXST – VIX – VXV – VXMT curve below. VXST and VIX made nice moves to the upside while the longer end of the curve moved up a bit less resulting in a slight flattening of the curve.
The long funds that focus on the first and second month futures were up slightly while the short funds were down slightly. SKEW and VVIX both moved up nicely last week which should be encouraging for volatility bulls or equity market bears.
The three funds that represent long (VXX), daily double long (UVXY), and daily short (SVXY) have had very divergent performance this year and last week didn’t really change much on the year to day performance below. SVXY did manage to top up 100% early in the week before falling off a bit.
The majority of volatility indexes quoted by CBOE were higher last week. If it weren’t for earnings from GOOG, IBM, and AMZN which resulted in a volatility crush in options on those stocks there would probably be more green on the table below.
Early Thursday, before volatility finally started to get moving someone came in and bought a large number of out of the money VXX calls with an outlook that appears to hope for an overdue volatility spike between now and September 15th. With VXX at 11.00 they purchased just over 2500 of the VXX Sep 15th 15 Calls for 0.34. Note about a 40% move is needed for this trade to break-even at expiration, for most markets that’s unheard of, but not in the volatility world.