The NASDAQ-100 was up along with all stock market indexes on Friday, but it was not enough to put the CBOE Nasdaq Volatility Index into the red for the week. VXN was the only tradable volatility index that gained in value last week. My assumption is that as we are in the early stages of earnings season is that higher implied volatility on large components of the NDX in anticipation of earnings results may have an impact on the spot VXN.
Even with the spot index a bit higher on the week, along the curve the futures actually lost value. As with the VIX curve, August was the weakest month down over 3%. July was down slightly as well as the premium relative to the index is under pressure with only two more trading days until expiration.
Finally – a note about the relationship between VIX and VXN. Both represent measures of implied volatility on US markets. From January 2009 through June 2012 the VXN has an average 0.85 premium relative to the VIX index. Based on last week’s activity the VXN is at a premium of 2.35 points which is closer to the higher levels of this relationship. The futures contracts also reflect this as the August VXN contract settled at 21.75 which the August VIX closed at 19.35 – a VXN futures premium of 2.40.