This Week in VIX and VXN

After making a new post 2008 low last Friday there was much talk about VIX dropping to single digits. Even options with a strike price of 9 have been issued. The island country of Cyprus put an end to that talk and got much of the financial world’s attention this past week. I actually had to turn to the globe in my home office to locate Cyprus (Full Disclosure – I Googled Cypress upon first hearing the news). An educational impact of this past week – the number of Americans that can locate (and properly spell) Cyprus has gone up 1000%.

VIX managed to rise 20% despite the S&P 500 only dropping 0.24% on the week. Remember with VIX performance it is often all about how the S&P 500 gets from point A to point B over the course of time and the path from 1560 to 1556 was a rocky one. Also, all Cyprus issues were not settled as of the close on Friday so VIX remains a bit elevated. What was a bit unusual was how the curve took the news or better said didn’t take the news. The new front month April futures contracts were up on 0.10 on the week with the biggest movement coming from the September and October futures which were both up by 0.40 for the week.

The NASDAQ-100 rose a whopping 0.05% on the week, but again the past to basically unchanged was a rollercoaster ride. The result was a rise in VXN by 15% to 13.88. VXN finished the week at a premium of 0.31 to VIX which is the low end of the historical range. The VXN April futures are a little bit wider premium to April VIX futures finishing the week at a premium of 0.80 which is still a little low relative to history.

VIX VXN.jpg