Weekend Review – VIX Futures and Options – 9/19 – 9/23

VIX reacted to the post FOMC rally by giving up just over 20% last week.  The standard September contract went off the board leaving October to take over as the front month.  With a little time until October expiration (10/19) the result has been resumption of pretty steep contango.  Of course there are some potentially market moving events between now and the end of the year so VIX futures bracing for some sort of spike may be expected.

VIX Contango

As I wrote the previous paragraph it occurred to me that I have been posting blogs on VIX futures trading for over four years.  This means I have access to curve data at this time before the last presidential election.  I dug into my archives and was pretty surprised at what I found.  The figure below shows the VIX curve this past Friday versus the curve on September21, 2012.  VIX was a bit higher four years ago, but in comparable range near the lower end of the long term average.  I was honestly shocked by the steepness of the far months on the 2012 curve below relative to the 2016 curve.  Maybe 2008 was a recent enough memory to keep the risk premium of VIX futures at such a high level.

2012 vs 216 Curves