This was expiration week for VXEEM and VXEWZ contracts with September going off the board. VXEEM September contracts settled at 21.80 and VXEWZ settlement came in at 26.62. It was interesting to note that VXEEM settlement at 21.80 was lower than any closing price over the life of the September futures contract and 26.62 for VXEWZ was also lower than any settlement price over the life of the September VXEWZ futures.
The trend in emerging market volatility continued lower taking the lead from risk measures in developed markets. VXEEM closed out the week at 20.24 and appears poised to test the teens shortly. VXEEM’s drop last week came despite a drop in the underlying EEM exchange traded fund. VXEWZ finished the week at a slightly higher level, 25.16, but trended lower despite a drop in the underlying EWZ exchange traded fund.
The futures curves told different stories. VXEEM trading was pretty uniform and the curve shifted in a parallel manner. The VXEWZ threw the markets a curve ball with November futures being an outlier and settling slightly higher for the week despite the lower index and a drop in October and December futures.