Volatility, excuse me I meant <<<< !!VOLATILITY!!>>> $VXX $UVXY $XIV

So that just happened, right?

It wasn’t just what happened in the regular session but WTF happened after hours? 

The XIV, which is the inverse of the VXX fell about 15% in the regular session down from 115 to close at 99. I even bought a little bit in my speculative account at 96, as a hedge, as I am net long options in the VXX and UVXY. 

In after hours, the XIV traded down to 15.43, yes, it lost 84.4% in the after hours session. I generally walk away from the market at the close or otherwise I would have doubled my position in XIV. 

What is going on here? All I can think is that were some big institutions that where making some extra $$ by being short volatility, and that worked until last Friday. It even seemed to be ok today until late this afternoon. 

At some point after hours these guys decided to cover the short which sent the VXX from 43.94 to 56.57, as a frame of reference it closed on Friday at 32.92 and actually traded down late in the morning. The UVXY went from 13.67 to 22.87 at the close today (gain of 66.21%) to add another 6.10 in after hours to end up at 28.97 (another 26%). 

This looks to me like panic buying, just as in the afternoon it looked like panic selling. 

I had planned to talk about some of the trades I made this morning but this focus on volatility has just taken over. 

I am net long both VXX and UVXY but gains on both are going to be capped because we are waaay past my short call positions. 

But this has the real potential to correct right back to where these ETNs were trading this morning, or even where they were tading last Thursday. 

As an aside, last week I noted that in accounts trading a lot of options can appear to blow up when volatility spikes. This morning in my speculative account the total value fell the normal 3-4% after the market opens. This happens because Fidelity assigns the value of an option in the worst possible way depending if you are long or short. If you are long they value the option only at the bid price, which is what you can get if you have to sell it. Likewise, they value short options at the ask price. Overnight they value the option at the last traded price which is more at the midpoint. So, when the market opens and bid/ask prices become available, the total value falls. Today in the late morning it was down about this normal 3-4% but at some point, in the late afternoon it suddenly fell about 35%. It’s not real, and it will be interesting to see what it looks like in the morning. 

Bottom line for me, I think this is an opportunity to get longer. Karen Finerman stated on Fast Money today that she sold half of her S&P puts today and will sell the other half if there is a whoosh down tomorrow. 

I’ll probably do the same.