Back Derivatives Strategy

VIX and VVIX Back to Support Lows and is ARKK Doing a Deja “Two”?

Published on June 29, 2025

Jeff Jacobson

The equity market continued its march higher last week with both the S&P (SPY) and Nasdaq (QQQ) closing at all-time highs. Small caps (IWM) also ended the week higher by ~ 3%, but they continue to lag the large caps and IWM also failed to close above the 200-day moving average (which it has been below since February). As the main indices made new highs, VIX moved back down towards the support lows ~ 16 I have been mentioning for some time. In addition, my “preferred” measure of vol (VVIX – or the vol of vol index) also moved below 90 before closing higher on Friday (even as markets closed just off their highs). I believe the action in VVIX on Friday is very supportive to owning VIX calls/call spreads at this level. In fact, VVIX was already trading higher (with the market) even before the afternoon tweet by President Trump on Canada and tariffs (where vol spiked even higher). The short-lived market pullback, and the accompanying spike higher in vol is a reminder that with stocks up at these levels there remains a fair amount of headline risk. I also believe as investors get more complacent with every pullback being bought that any “real” decline could see a very sharp spike in vol as it appears that a lot of investors have given up on hedging.

As I have been stressing, if there is a “floor” to vol at/near these levels then VIX calls or wide call spreads should serve as a very attractive macro portfolio hedge. Perhaps it is dealers unwilling to let vol get much cheaper, or it is investors continuing to buy more upside structures, but either way it appears that vol does have a synthetic floor around these levels. Even if the indices continue higher, as long as vol doesn’t move meaningfully lower then VIX calls should act much better than say index puts (since the delta of the call is unlikely to change much). Using Friday as an example, the VIX Aug 23 calls (40-delta) were UP small even as SPY gained another 50bps. By contrast, the SPY 605 puts declined by 10% (.92) as the delta moved lower as the index climbed. Given this setup, I would suggest either owning wide Aug calls spread in VIX (say 24/50 call spread for ~ $1.25) or just buy Aug VIX calls outright as a “tail” hedge (VIX Aug 30 calls for ~ $1) with a lot of convexity.

VIX index back to the recent lows

VVIX index (vol of volatility) also started to move higher from levels where it has bottomed recently

Time to fade the move in ARKK?

The sharp rally in ARKK since April reminds me a lot of the move off the lows last summer into the Feb highs. In both cases, ARKK gained a whopping 85%, outperforming both the S&P and Nasdaq by a substantial margin. The reversal from the new highs on Wednesday looked a lot like the sharp reversal (bearish engulf) we saw back in Feb (ARKK declined sharply shortly after). I also thought the action on Friday could be quite telling as ARKK declined by 1.68% even as QQQ was up by 0.34%. Given the outperformance by ARKK, and the fact that the semi (SMH) weighting in ARKK is significantly less than in QQQ, I think ARKK downside structures could make for an interesting trade/hedge for accounts currently overweight the tech sector. With many of the top-weighted names in ARKK reporting after July expiry, I favor owning August structures to play for a pullback after this very sharp rally. Here are two trades I would consider at this time:

Trade #1 – August put spread

Buy ARKK Aug 65 puts

Sell ARKK Aug 55 puts
Costs ~ $2 (ARKK 69.84 Fri close ref)

Trade Details:

Buying the 10-point wide Aug put spread that starts less than 7% below spot
Trade offers a 4x to1 max payoff on the limited-risk bet/hedge
Could be used to hedge an existing “overweight” tech position given the massive outperformance
Saw ARKK decline sharply back in Feb (underperforming QQQ significantly) after a similar-type rally and outperformance
Aug expiry captures earnings for many of the largest weightings in ARKK (TSLA, COIN, ROKU, TEM)
Please contact me or the 22V sales desk for updated pricing and execution capabilities

Trade #2 – August put butterfly

Buy ARKK Aug 65 puts 1x
Sell ARKK Aug 55 puts 2x
Buy ARKK Aug 45 puts 1x
Costs ~ $1.60 (ARKK 69.84 Fri close ref)

ARKK August put butterfly – targeting a pullback to support at the 55 level (200-day and an exact 50% retracement of the recent rally)

Trade Details:

Buying the August put “butterfly” in ARKK following sharp rally
Targeting a pullback to support at the 55 level (200-day moving average and 50% retracement of the April – June rally)
Trade offers a 5.25x to 1 max payout
Put butterfly reduces cost since ARKK vol continues to trade “rich” to both QQQ and SPY
Aug expiry captures earnings for many of the largest weightings in ARKK (TSLA, COIN, ROKU, TEM)
Please contact me or the 22V sales desk for updated pricing and execution capabilities

ARKK rallied the same 85% from the April lows to the current highs as it did from the Aug lows to the Feb highs

ARKK outperformed both QQQ and SPY by a 2-3x beta off the lows from April

The ARKK/QQQ relative spread move between April and now is also very reminiscent to the move we saw between Oct and Feb

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