This Week in VIX and VXN

It was a heck of a week for VIX futures trading as the single day volume record was shattered on Tuesday. So far in 2013 the average daily VIX Futures volume is running at 149,551 – average daily volume in 2012 was 95,142. This is a clear indication of the continued acceptance of volatility as an asset class in the market place.

The picture below depicting the week over week change in the VIX curve does not do the week justice. On Tuesday VIX rallied to 18.99 and the index was at a premium to the front six month futures contracts. One trader in the VIX pit described Tuesday as a day that everyone rushed into volatility and then said Wednesday was a day everyone rushed out.

The NASDAQ-100 was up a little more than the S&P 500 on the week. I was surprised to see VXN was actually down slightly. My assumption was that with VIX up over 8%, VXN should have been higher on the week as well. This is the second time I have noticed this sort of disconnect between VIX and VXN. The first time was around the Fiscal Cliff news at the end of 2012. Two occurrences do not make a trend, but it may just be that VIX reacts differently to macro events than VXN. It’s definitely something I will keep my eye on.