Last spring at the CBOE Risk Management Conference one of the speakers was asked what would it take for volatility to move to higher levels and remain there. His response was basically we would need to see two dips in the stock market without much of a rebound. It took a few months, but what he was talking about may have just happened last week. The consistent move higher in VXST definitely reflects a reaction to the type of trading activity he was talking about.
The VXST curve moved from contango to pretty dramatic backwardation as can be seen below. The S&P 500 action last week resulted in VXST closing over 21 for the first time since February and the October 15th VXST future finished the week over 21 as well. In the option space the VXST Oct 15th 23 Calls have the most open interest.
Finally – the best place to find out everything you need to know about VXST is www.cboe.com/vxstms