VIX Spiked on Last Trading Day, Then Fell Sharply to Settle Lowest in Years

Wild Swings on VIX before March Expiration

Last week was the week of VIX futures and options expiration and we saw a very interesting action on the VIX on Tuesday (the last trading day) and Wednesday (the expiration day when the settlement value is determined at open). On Tuesday the VIX climbed above 15 intraday, the highest in two weeks, and closed at 14.39. On Wednesday it opened far lower around 13, and the settlement value for March options and futures was even lower at 12.64, the lowest in years. At the end of the week the VIX was fluctuating mostly in the 13-14 area and closed at 13.57 on Friday.

VIX in March 2013

VIX Futures Curve

In line with the spot VIX, the short end of the futures curve moved sharply lower on Wednesday, when the March 2013 contract settled at a surprisingly low level of 12.64. Although the spot VIX returned to about the Monday level at the end of the week, this move was not entirely reflected in the futures prices very much.

VIX futures curve

VIX Option Prices Higher

The VVIX index, which measures implied volatility of VIX options, remains above 90, a considerably higher level compared to the first half of March.

VVIX in March 2013

Going forward, fundamental news from Europe (especially Cyprus), as well as S&P500 technicals, will probably be among the drivers of volatility markets.