This past weekend Steven Sears committed the whole Striking Price column in Barron’s to VIX Weeklys. I would strongly suggest checking out the full column, as well as reading it every weekend as it is a great way to learn more about options. Some highlights include –
- Weekly VIX futures contracts were introduced July 23th and the options are expected to begin trading on October 8th
- The shorter dated VIX futures are expected (and already have been) to track spot VIX more closely than longer dated futures
- This shortening of the time to expiration for the nearest VIX future will create more opportunities to gain exposure to VIX for both futures and options traders
As an example this past Wednesday was the first settlement day for VIX Weekly futures. The standard August contract will settle on August 19th. The chart below shows daily closing prices for VIX and settlement values for the short dated August 5th and August 19th contract.
The chart shows daily closing prices from the July 23rd launch through August 4th, the day before AM settlement for the August 5th futures. Note the spike on the left and how the Aug 5th contract moves up in line with VIX and how it also fades lower in line with VIX. It is early in the game for short term VIX futures, but the evidence shows those that want long exposure to VIX, in anticipation of a ‘spike’, or traders who like to take the other side of the periodic spikes in VIX will be well served by the consistent availability of VIX futures with just a few days remaining until expiration.