VIX Futures Have Lost up to 3 Points since End August, with Little Steepening

Tuesday, 17 September 2013


The markets seem to have recovered from the latest correction, at least for now. S&P500 has not exceeded its early August and all-time high (1709.67), but it is now within 1% (and Monday close was the 4th highest in S&P500 history). The big technical picture is still a long-term uptrend, as the end August low was much higher than the previous one. To confirm the uptrend we would certainly like to see the all-time high improved soon.


Spot VIX Index

The spot VIX index has been in the 14’s, so from a purely mean reverting perspective there is no particular trading opportunity on either side – it can go anywhere (as usual). The tapering story has probably limited spike potential now, save for any surprisingly hawkish rhetorics by Fed officials. Number one risk factor is the geopolitical situation (Syria), but of course the greatest VIX spikes arise from the least expected factors.


VIX Futures

In line with the spot, VIX futures have lost a lot from the end August peak. The most important feature of this move has been the lack of steepening, as the futures curve has made an almost parallel downward shift of 1.60-2.80 points (if you ignore the nearest month, the range of the changes is only 1.60-2.60). Volatility expectations for the rest of the year and for spring 2014 have gone down significantly.

VIX futures curve VIX futures - constant maturity 2 months VIX futures - constant maturity 3 months VIX futures - constant maturity 4 months VIX futures - constant maturity 5 months VIX futures - constant maturity 6 months VIX futures - constant maturity 7 months VIX futures - constant maturity 8 months

Traded volume in VIX futures has stayed off the highs in the recent weeks, although it has recovered from the summer lows. At this time last year the volume was making new historic highs. Not this year, but y/y increase from 2012 remains somewhere around 50-70%.

VIX futures total trading volume (21-day moving average)

VVIX Index

The VVIX index, which measures implied volatility of VIX options in the same way as the VIX measures implied volatility of S&P500 options, is around 80, roughly the middle of last two months range, like the VIX itself.


September VIX Expiration

September VIX futures and options expiration is this week. Trading stops at close today and the final settlement value will be determined by the SOQ at Wednesday open.