Today I completed number two of the trifecta of webcasts on trading volatility being offered at CBOE this week. Today’s webcast was on the CBOE Short-Term Volatility Index (VXST), but I did spend some time talking about the term structure of SPX volatility that can be determined by putting together the four volatility indexes that based their value on SPX option markets. Those indexes are VXST (9-day), VIX (30-day), VXV (3-month), and VXMT (6-month). Today with the S&P 500 down over 1% there was quite a shift in the SPX term structure curve. I illustrate this below –
Note VXST was up over 16% while longer dated volatility indexes did not rise as much as VXST. This is common when the S&P 500 is under pressure. Short term fear moves in and out of the market fairly quickly. A rebound in the S&P 500 tomorrow would probably result in a quick dip in VXST and enough strength would place VXST at a discount to VIX where is has been over 60% of trading days since 2011.
If you missed the VXST webcast we will have a replay available beginning Friday and will tweet and blog that information when we have it.