The S&P 500 and Nasdaq-100 were both lower last week, but that’s where the similarity ends as far as volatility trading goes. VIX rose about 4.5% and the near month futures follow the index higher. Farther out on the curve futures actually dropped a bit as the curve of VIX futures continued to alter from a linear shape to a more traditional curve.
VXN was lower on the week, even with the NDX down. We had some major technology earnings and product announcements which may have translated into VXN being a bit elevated with some anticipation of some of the larger NDX components having large price moves into earnings and other events.
I was watching the spread between VXN and VIX closely this past week as there was a 3 point difference between VXN and VIX a week ago. As earnings and some other stock specific events have passed for NDX related stocks, VXN dropped relative to VIX last week and the spread narrowed to about 1.70 which is still slightly above the average spread for 2012. The November futures narrowed a bit as well going from 2.25 to 1.70 this week as well.
As always comments were posted last night on VIX options and exchange traded products –