Not much of a change in the S&P 500 in the last week, as it traded in a tight range between 1460 and 1474, and it’s up about 0.5% from last Wednesday. VIX spot has not moved much either. It’s down from 13.58 to 13.29 in the past week, and has also traded in a tight range, moving between 13.20 and 14.00.
The real story has been in the longer dated VIX futures contracts.
Here is last week’s snapshot:
And today’s snapshot:
Normally, when volatility is low, you will see the front month VIX futures contracts decline more than the back month. But what we’ve seen in the past week is the back end futures contracts decline just as much as the front. The Feb and March contracts are down close to 1 point, and so are the Aug and Sept contracts.
Given that historical realized volatility in the SPX index has not been above 20 for more than a year, the back end of the VIX futures curve is still pricing in a substantial increase in volatility over the next 6 months relative to recent history. As a result, I wouldn’t be surprised to see the back end futures continue to come in sharply on quiet weeks.