With the 1% drop in the S&P 500 came a rise in VIX. That is how things are supposed to work. However, looking beyond the index performance tells a slightly different story. The other story is one of expectation. VIX rose over 12% on the week which is a little more impressive considering we are in the midst of a three day weekend. As the VIX calculation is based on calendar days, pre-holiday Fridays often provide a little headwind to VIX and if we didn’t get Monday off this week VIX probably would have a 14 handle. That’s not saying much since VIX closed at 13.99. The other story about VIX performance refers to the price action in the futures. The futures were at a pretty steep premium to the index going into this week. That gap was narrowed as the futures markets did not move up nearly as much as the performance of the index this past week.
The NASDAQ-100 was down by 1.2% on the week, but VXN did not put quite the number VIX did rising just over 10% on the week. Note the narrow spread between VIX and VXN at 0.49. On average VXN is usually at about a 1.50 premium to VIX. Finally note that the futures spread on the close Friday was not quite the same as the index spread as June VXN closed 0.95 higher than June VIX which is a little closer to the norm.