Weekend Review of VIX Futures and Options – 12/24/2017

December VIX went off the board and January became the front month this past week.   VIX moved higher for the week, however, all the standard futures moved down a bit.  The contango is still steep as traders start to brace for 2018.

 Weekend Review of VIX Futures and Options – 12/24/2017 at vixtrade.com

Late Friday someone executed the VIX version of a covered call focusing on the standard March expiration.  About 1200 of the VIX Mar 13 Puts were sold at 1.92 and March 13 Calls purchased for 2.03.  For those who don’t remember their put-call parity from school short put plus long call is the equivalent of being long the underlying.  In VIX world the closest thing to an underlying for the options is the corresponding future.  At the time of the trade the March VIX future was trading at 13.10, the synthetic long position created by selling the put and buying the call cost 0.11.  Adding 0.11 to the strike price gives you an equivalent price of 13.11.

Now that I’m done lecturing about put-call parity I’ll get back to the trade.  The trade was finished with the VIX Mar 23 Calls being sold for 0.76.  The net result was a credit of 0.65 and a very familiar looking payoff at expiration.

 Weekend Review of VIX Futures and Options – 12/24/2017 at vixtrade.com

 Weekend Review of VIX Futures and Options – 12/24/2017 at vixtrade.com >

Weekend Review of Volatility Indexes and ETPs – 12/24/2017

The volatility index price action relative to the equity market price action was pretty interesting last week.  The S&P 500 was higher, as were three of the four volatility indexes calculated using S&P 500 option pricing.  VXST was lower, but that is very common before three day weekends due to the calculation methodology (calendar days) when we have the market closed for three days.

 Weekend Review of Volatility Indexes and ETPs – 12/24/2017 at vixtrade.com

VVIX stays over 90 and moved up a bit last week and TYVIX moved nicely off closing at an all-time low on the previous Friday.   The long funds suffered a bit despite VIX moving higher as a reminder that VXX is not VIX.

 Weekend Review of Volatility Indexes and ETPs – 12/24/2017 at vixtrade.com

Usually the holiday season with the extra days off results in volatility indexes suffering a bit of a head wind.  I was surprised to the point of double checking numbers before posting the table below as I would have expected more indexes lower than higher last week.

 Weekend Review of Volatility Indexes and ETPs – 12/24/2017 at vixtrade.com

UVXY hasn’t had a very good 2017, which is being polite.  At least one trader thinks UVXY will not be gaining any of the losses back next week.  With 2 minutes left in the day and UVXY at 10.10 a trader sold 600 UVXY Dec 29th 10.00 Calls for 0.43 and then purchased 600 UVXY Dec 29th 12.50 Calls for 0.14 taking in a credit of 0.29.

 Weekend Review of Volatility Indexes and ETPs – 12/24/2017 at vixtrade.com

Note in the payout diagram above, UVXY only needs to drop 0.10 or more.  Considering that UVXY dropped 36 of the last 50 weeks and the average weekly performance being down over 4%, this trade makes some sense.  Barring a year end volatility event things should work out as hoped for this trade.

 Weekend Review of Volatility Indexes and ETPs – 12/24/2017 at vixtrade.com >