The Week in VIX – 10/27 – 10/31

VIX dropped about 12% as the S&P 500 made another all-time high. We call know that, but looking at things in context, VIX is much higher than where it was the last time a record closing high was put in for the S&P 500. The numbers say people may be a bit more worried than they have in the past about the equity market.

VIX PA 

The VIX curve term structure also may signal a little extra market concern. I see contango, but I also see the November future at a 1.77 premium to the index. That’s wider than what we have become accustomed to over the past few months. VIX futures can be compared to the spot index and a risk premium for sellers of volatility can be extracted. They are getting paid a little more to be short volatility than they have for most of 2014.

VIX CURVE

Finally, I love when the last sizable trade of the week is the most interesting. Someone came in just a few minutes before the close on Friday and sold VIX Nov 15 Calls for 1.74 while buying VIX Dec 15 Calls at 2.27 and a net cost of 0.53. May just be someone is trying to pinpoint some sort of stock market pullback in late November or early December. More specifically between November 19th and December 17th