VIX, VXN, and all futures based on these two indexes were under pressure last week. With stocks making all-time highs nothing less should be expected for the implied volatility on these markets. I noted in an earlier blog that the trading volume in VIX options has shifted out to contracts that expire in April. On Friday 57,000 April VIX futures traded, just 10,000 less than the number of March contracts. Even though the March contract has a week and a half until expiration, April is already starting to be the time frame that is getting more attention from the futures market as well.
VIX lost 18% while VXN dropped only 12%. The front month (March) VIX Futures dropped about 16% while the VNX Futures lost about 13%. The spread between the indexes and futures is around the mid-range of the spread over the last few months after VIX and VXN almost converged last Friday. I continue to find interest in the spread between the two and notice that macro events show up in VIX more than VXN. We shall see if this happens the next time the market gets a jolt from some sort of unexpected news.