VIX rebounded nicely last week mostly based on weakness in the stock market on Thursday. Despite a 13% rise, VIX is still hovering around very low levels with a 12 handle to finish the week. If I had been away from the markets for a month and saw VIX at 12.18 on a Friday my assumption would be that the S&P 500 was up a percent or more that week, not lower by 0.7%.
The June contract finished the week at 12.95 which has a little risk premium built in for the last two trading days before settlement. The curve is pretty tame considering what we saw in the oil market last week. Eventually higher oil prices, at least those that are the result of crisis and not economic growth, tend to work into lower stock prices and by default higher SPX volatility. So far the stock market is ignoring the quick move up in oil prices from last week. Of course we have been desensitized to small market moves that in the past have been worrisome whether it is a drop in gold, spike in oil, or small setback in the stock market.