S&P500 Back to Pre-Election Level, VIX Lower

Thanksgiving Week Rally Brings S&P500 Back to Pre-Election Level

Equities rallied during the last week, especially on Monday and on Friday. US markets were closed on Thursday for Thanksgiving Day and closed early on Friday. On Friday close S&P500 got almost exactly to the same level where it had traded the day before elections (5 November). Yesterday equity markets more of less maintained their gains and S&P500 closed at 1406.29.

S&P500

VIX Stays Low after Narrow Range Week

The holiday mode together with rising equities kept the VIX (CBOE Volatility Index) trading in a narrow range between 15 and 16 (it only briefly got below 15 on Wednesday morning). Yesterday the VIX ended at 15.50.

VIX

VXV Underperformed VIX

VXV (3-month S&P500 implied volatility index) also stayed in a narrow range, but it has slightly corrected its post-election outperformance of the VIX. VXV closed at 17.31 yesterday, with VIX/VXV ratio at 0.90.

VXV

VIX Futures Curve: December at No Premium to Spot

Although spot VIX barely changed since last Monday, the whole VIX future curve shifted lower, while maintaining its slope. November VIX futures expired last week. The December futures contract, the new front month, lost in line with the rest of the curve and it is now at virtually zero premium to spot VIX (15.60 vs. 15.50), although 3 weeks remain until December expiration. There is a seasonality factor (lower volatility expected around Christmas and year end), but it could still be interesting (for example as a hedge if you are worrying that the fiscal cliff talks could fail). The lowest intraday spot VIX level this year (and the lowest since 2007) has been 13.30 in August (this of course does not mean that it can’t get lower).

VIX futures curve