It was a tumultuous week for VIX. June settlement came in at 17.22 which was the highest settlement value since last year. The S&P 500 was off 2.11% which matched the worst weekly performance in 2013. Thursday, with the stock market under pressure VIX closed over 20.00 for the first time this year and the index was at a premium to both the front two month futures contracts. Finally, Thursday was the second busiest day in the history of the CBOE Futures Exchange. What ever happened to the summer doldrums? Not that any of the volatility traders are complaining.
The NASDAQ-100 took it on the chin this past week as well losing 2.24%. What I found interesting was the relative performance of VXN to VIX and VXN futures to VIX futures this past week. VXN usually is quoted at a premium to VIX, but during times of excess market volatility the two markets seem to come together. This last happened around the fiscal cliff scenario at the end of 2012. This past week, on Thursday VXN was actually at a discount to VIX on the close before the situation reversed itself on Friday. What was also interesting was how the futures markets interacted. The July VXN and July VIX contracts both closed at 19.65 on Thursday. The average spread between these two markets has been 1.07 since July VXN futures were listed on March 25, 2013. Also the maximum spread, based on closing prices, has been 1.55 and minimum was 0.00 seen Thursday. The chart below shows this in more detail. The red line is the daily closing prices for July VXN futures, blue line represents the closing prices for July VIX futures, and the bottom purple line shows the outcome of subtracting the VIX futures price from the VXN futures price.