Starting this weekend I will be posting a weekly review of trading in the volatility arena. We now have trading available on volatility indexes based on six markets. I will be compiling weekly performance for all of these indexes and the futures that trade based on these indexes. In addition we will take a look at futures spreads along with the curve of these futures prices.
For each futures contact series there is a table showing the weekly performance of the index, a spread matrix displaying the change for the price spread between each contract and then finally a chart showing the curve of the index and futures prices from last Friday and the curve of the same pricing this week. There is more to volatility than just the volatility indexes, these tables and chart are a good depiction of what the professional traders are watching during the trading day.
The spread matrix tracks the spread as if the index or near month were a short positions and the farther dated month were the long part of a spread. This method was chosen as typically volatility futures trade at a greater premium to the index the farther the expiration date of the future.
VIX Futures –
For those not in the know, the CBOE Volatility Index (VIX) is a measure of market expectations of near-term volatility conveyed by S&P 500 stock index options prices. Last week the spot VIX was basically unchanged moving up by 0.02 from 17.08 to 17.10. What was interesting in the VIX arena is what occurred with the futures contacts. Although the index was flat the futures contracts all lost value last week resulting in an interesting shift in the curve.