Here is last week’s snapshot:
Compare that to today’s snapshot:
The back end of the VIX futures is what continues to attract my attention. The June13 VIX futures has moved down about 2 points in the last 2 weeks, which is an almost 10% move for something that does not expire for 9 months. The entire VIX futures curve is moving lower, but it’s rare that the back end moves so aggressively.
That being said, 2012 has been an unusual instance in which the VIX has overestimated 10-day historical volatility in the SPX by 47% – the biggest cushion since 1996. Not surprisingly, low realized volatility tends to depress the VIX and the front end of the VIX futures term structure in general.
Traders are starting to correct for their overestimation of volatility in 2012 by selling volatility out ot the middle of 2013. Of course, the current complacent environment might be exactly the wrong time to adjust those expectations.