This Week in VIX – 11/29/2013

The S&P 500 put up a small gain on a shortened week and VIX responded by rising from 12.26 to 13.70.  In fact with the exception of the Brazilian market all the tradable equity volatility indexes moved in sync with their underlying markets.  This is unusual activity, but Thanksgiving week is never a normal trading week.  Taking things a step further, despite the index rising, everything between the December future and the July actually dropped slightly on the week.  The December future was up 0.35 to 13.95, this puts December at only a premium of 0.25 to VIX.  In this low volatility environment, that is the sort of premium you normally see on the Friday before expiration Wednesday, not in a couple of weeks on December 18th.

So, what does it all mean?  I am honestly having a hard time figuring out how to read the current environment.  About five years ago when I was going through the interview process to join the Options Institute, Marty Kearney said he liked the fact that if I didn’t know something I would admit it.  Well, VIX has me confused for the moment.  If I get an epiphany I’ll be sure to share it in this space.

VIX Futures

 

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Russell Rhoads, CFA

CBOE Options Institute

Russell Rhoads, CFA, is a Senior Instructor with the Options Institute at the Chicago Board Options Exchange. He joined the Institute in 2008 after a career as an investment analyst and trader with a variety of firms including Highland Capital Management, Caldwell & Orkin Investment Counsel, TradeLink Securities and…

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