Finally, volatility based ETFs and ETNs were active last week, and we not only point to flows in the ETF/ETNs themselves but also in the options markets. As the VIX has risen from its low point of 17.14 in late July to as high as 48 during the August equity market turmoil, trading in VIX and iPath S&P 500 VIX Short Term Futures ETN (NYSEArca: VXX) options have been exceptionally active.
There had been heavy institutional interest in VIX and VXX calls when the VIX was still trading with a handle in the mid 20s and low 30s, and many of these call buyers have liquidated their open call positions into the subsequent rise in the VIX, which has now pulled back considerably off recent highs, and closed Friday at 35.59. [Investors Take Profits in VIX ETFs]
In fact, there have even been some cases of put buying in the VIX lately in the capital markets, especially in the latter half of last week. VelocityShares 2X VIX Short Term ETN (NYSEArca: TVIX) has seen very heavy volumes in the past seven sessions as well as notable outflows of assets (in the neighborhood of 60% of the overall assets in the fund) as it seems clear that institutional investors are either taking profits and/or taking off their volatility hedges at these levels.
For those that believe that market volatilities will temper going into the fall and winter months, we have seen increased trading interest in VelocityShares Daily Inverse VIX Short Term ETN (NYSEArca: XIV) as well as iPath Barclays Inverse S&P 500 VIX Short Term Futures ETN (NYSEArca: XXV).
SPDR Gold Shares
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Full disclosure: Tom Lydon’s clients own GLD, SPY and TIP.
(Story updated to correct iShares Barclays TIPS ticker.)