This Week in VIX and VXN

When we first kicked around the idea of doing a weekly VIX review the title I use came from the old show, “This Week in Baseball”. Mel Allen was the original voice of TWiB and one of his catch phrases was, “How ‘Bout That”. Thursday and Friday we would get a headline and then a dramatic move in the equity and volatility markets. Those moves could have easily been followed by the statement, “How ‘Bout That!”.  

The S&P 500 and NASDAQ-100 both lost about 2% on the holiday shortened week as market participants. The expected result of a week like that would be higher VIX and VXN and that’s what we got. VIX climbed 27% for the biggest weekly gain in 2012 and VXN was 15% higher. The spread between the two indexes is down to 0.60. This spread was over 3 points just a couple of weeks ago. The front month futures settled with a wider spread as Jan 2013 VXN closed at 23.50 and Jan 2013 VIX closed at 22.35 for a spread of 1.15. The futures contracts are discounting the spread between the indexes widening a bit in the near future.

Also – Friday night I was compelled to post a blog focusing on near term VIX futures moving into backwardation.