Weekly Review – VIX Futures and Options – 1/18 – 1/22

The stock market rally on Friday put pressure on VIX and pushed the spot index down enough that the front month February future closed at a slight premium.  This is the first premium for the front month VIX futures relative to spot since January 4th.  I’ll discuss this a bit more toward the end of this blog.

VIX Long Term Curve

The generic short dated curve flattened out which I’m learning is the normal shape using the five consecutive weekly VIX futures contracts.

VIX Short Term Curve

As mentioned above, with Friday’s price action VIX is now at a discount to the front month future.  The result here is an end what goes down as the eighth longest streak of spot versus front month backwardation.

Friday Spot - FM

Another measure of backwardation and the one the VIX ETP traders care the most about involves the front month versus the second month futures.  February VIX actually closed higher than the March contract.  In fact every day in 2016 the front month has closed higher than the second month.  This run of backwardation is up to fourteen days.

Friday FM - SM

Finally, since VIX moved below February, this put an end to backwardation when comparing spot VIX, the front month, and second month futures price.  All the stars have to align for this measure of backwardation and this ended up being the third longest streak of backwardation on record.

Friday - Spot - FM - SM