The S&P 500 rose 0.4% last week while the Nasdaq-100 performed quite well with a rise of 1.3% on the week. The respective volatility indexes reacted by losing a bit of value. The VIX moved from 16.74 to 16.36 while the VXN dropped from 19.09 to 18.20. At first glance the difference is not all that significant, but the VIX dropped 2.27% while we witnessed a 4.66% drop in VXN – quite a different for those trading volatility of the two. Over the first half of 2012, the VXN was at an average premium of 1.35 to the VIX. The spread narrowed over the week from 2.35 to 1.84 – the premium is still above average, but getting close to ‘normal’ for 2012.
The VIX curve did not do much at all as the front month shifted from July to August. The curve was starting to shift, but a drop in the S&P 500 resulted in a higher VIX on Friday and the curve moved back in line with the shape from Friday July 13th. A slight anomaly on the VXN curve is the August contract which held at a premium to the spot even with the weak index.