This is what the VIX Futures term structure looked like last Wednesday when I posted:
Let’s compare that to today:
There are only a few small differences in the past week. Spot VIX has made the biggest move, going from 15 to 16.90, but that’s basically a function of September approaching, so options are starting to get bid up ahead of the heavy event calendar. Last week’s Sept VIX futures at 19 already told us that spot VIX was likely to start moving higher as September approached, but you can’t really monetize that move in spot VIX.
For example, you could have bought 1 month SPX index options (at-the-money straddles for example) last Wednesday, and the implied volatility of that straddle has gone up since last Wednesday, but the straddle has seen a coincident one week’s worth of time decay, so you would not have made any money on your straddle even though implied volatility went up. This is a good illustration why VIX futures are usually a better barometer to watch rather than spot VIX, as VIX futures are tradeable, monetizable instruments. You can just buy or sell them and make money if they move in your favor.
The VIX futures curve is up between 0.25 and 0.50 points in Sept, Oct, and Nov compared to last week, while Dec, Jan13, and Feb13 are only up 0.1 point. March and Apr are up around 0.5 point compared to last week.
Given that the SPX has averaged a 0.35% move over the past 5 days, it might seem a bit surprising that VIX futures are up across the whole curve. But the market’s appetite for protection is increasing as the announcement dates approach, regardless of the current market’s volatility. It will be interesting to see if VIX futures sell off a bit if Bernanke’s Jackson Hole speech on Friday is a non-event. My guess is that any selloff in VIX futures will be short-lived as the options market is clearly pricing (based on weekly vs. monthly options) the German Constitutional Court decision on Sept 12th, and the FOMC decision on Sept 13th, as the much more crucial market-moving events.