Most of the week Dec VIX futures were at a discount to the spot VIX index. This was despite the November employment report being released on Friday. The market yawned at the report with the S&P 500 finishing up slightly on the week and VIX finished the week basically unchanged. The December contract spent most of the week at a discount to the index, but traded to a slight premium on Friday. January was slightly higher while the rest of the VIX futures contracts traded lower and the result was a flattening of the curve.
The December futures price action, basically in line with the index, is a clear indication that the market expects any volatility to occur after December expiration (December 19). On the other side of the coin, January futures are at a consistent premium to the index and of course December contract. From an academic and market watcher standpoint this is an interesting scenario to watch unfold.
The NASDAQ-100 and VXN activity was a completely different story last week based on price action in a single stock – Apple (AAPL – 533.25). The NDX lost about 1.4% last week and VXN traded up over 9% on the week. The interesting thing is that the futures curve experiences a fairly parallel move. This indicates that the feeling in the market place is that higher volatility for the NDX may be around for a while.