The S&P 500 was higher and VIX was higher as well last week. However, as I say often, I pay more attention to what the futures are doing than VIX and they were all lower last week. The spread between the November futures contract was at 1.86 last Friday and narrowed to 0.54 this week. November VIX is indicating the VIX derivatives market is not concerned about VIX moving up much from here. The VIX curve has been at a very steep, almost linear downslope, for weeks and it appears to have taken some baby steps back to a more normal looking curve as the futures came down relative to the index.
VXN has quite a week as the reporting tech stocks did not do particularly well this earnings season (think GOOG). With the NDX down 1.5% on the week, VXN rose over 12%. As of Friday VXN was at a 3 point premium to VIX and the VXN November Futures were at a premium of 2.25 over the November VIX contract. This spread can continue to widen to stay around current levels for some time, but eventually there should be a reversion to some an average spread between the two. VXN trading is still relatively new, but I do enjoy watching the price relationship between VIX and VXN futures.
As always comments were posted last night on VIX options and exchange traded products –