VIX closed over 16 three of the past five days this week for the first time since early September. Time will tell, but I feel 16 may become the new over / under for what is considered high or low for VIX. Near month VIX futures were higher in line with the index while farther month futures actually traded lower. Note the shift in the curve on the left chart below. Futures volume was a record last month and so far this month average daily volume has stayed over 100,000 contracts a day.
VXN was higher as well as the NDX dropped over 3% (about 1% more than the S&P 500 on the week). There was a parallel shift in the curve as well, but VXN futures are listed only out to January 2013 expiration. The twist of the VIX curve occurred starting with the February contract. If VXN contracts went out that far a similar shift may have occurred.
VXN climbed to 17.84 which is a premium of 1.70 to VIX and close to the high end of the spread between the two. Something I found interesting was the spread between October VXN futures and October VIX Futures. Oct VIX closed at 16.65 while Oct VXN settled at 18.60 – a spread of 1.95 points. The average VXN – VIX spread has been 1.40 this year so this pair will be interesting to watch over the next couple of days into October expiration. I have a theory that earnings season has more of an impact on VXN than VIX due to the composition of the NDX. This is the first real opportunity to see if it plays out well in the futures markets.