For the past few weeks VIX and VXN have been quoted in synch. In fact this past Wednesday morning July VIX settlement was 14.43 while the July VXN futures settlement value was 14.33 – only a 0.10 difference. The chart below shows the daily closing prices for VIX and VXN in 2013.
Until 2013 these two volatility indexes had been quoted at an average spread of around 1.50. That was until this year where the spread has narrowed with both being historically low. This second chart shows the spread as determined by subtracting VIX from VXN on a daily basis. The average for 2013 has been 0.95 and for the past few weeks the spread has been oscillating around 0. That is until Friday of this week where the spread widened out to 1.21.
Friday NDX dropped based on some disappointing earnings results while the S&P 500 achieved yet another high. What transpired after this was a drop in VIX, but a gain in VXN as both reacted as would be expected (opposite) of their underlying indexes. We’ll keep an eye on the spread between the two as the year progresses and see if the average keeps ticking up back to that 1.50 point average.