Both the S&P 500 and NASDAQ-100 rose over 1% last week. Hearing that the expectation would be that VIX and VXN both dropped, but news out of Washington, DC kept VIX in play and the result was about a 5% rise in VIX for the week. If Friday had been a half day VIX would have closed much higher as early Friday VIX was testing the 20.00 level before backing off in the afternoon. VXN was a different story last week, but as we all know by now, VXN has been heavily influenced by price action in Apple (AAPL – 519.33). AAPL shares only rose 10 points on the week last week and the stock seems to have taken a pause from the recent headline grabbing price action in both directions. VXAPL was down on the week from 43.63 the previous Friday to 39.47. This drop in AAPL implied volatility carried over to VXN which finished the week down 0.05.
An area of interest for me is the spread between VXN and VIX. Last week I noted that VXN was at a 3 point premium to VIX which has been the high end of the spread between the two over the past few months. With VXN down a bit and VIX rising last week that spread has narrowed to 2.32 and the January futures spread went out at 2.30. The average spread for 2012 has been 1.50. The highest spread was VXN at a 3.34 premium to VIX and the minimum spread actually had VXN at a slight discount (-0.24) to VIX.
More on the spread between VXN and VIX is discussed in a recently published White Paper on VXN –