The VIX has been very active since last Wednesday morning (before the FOMC minutes were release), when I last wrote the snapshot. Back then, VIX spot was trading at 12.54, and the entire futures curve was cheaper, as shown in last week’s snapshot:
Even with the severe fall in the VIX in the past 2 days, the VIX futures curve is still substantially above last week’s levels, more than would be expected by just looking at the current level in the SPX (1516) compared to last week’s level when I wrote this post (around 1526). Today’s snapshot:[caption id="attachment_23114" align="alignnone" width="626"] VIX Futures Curve 022713, Courtesy of Bloomberg[/caption]
The front month of the futures curve has increased much more than the back. March is up almost 1.5 points, while Apr is up 1 point, May is up 0.75 and June is up 0.5. Oct and Nov are actually unchanged.
Most notably though, realized volatility in the SPX index has increased significantly in the past week. 10 day realized vol in the SPX is up to 16.5, much higher than the below 10 readings registered for most of 2013. As a result, I don’t expect VIX spot to revisit the 12 level anytime soon, since options traders will be cognizant of the fact that the current environment is more favorable for long options positions given the rapid back and forth moves.
I expect the past week’s price action to have established a new normal for the VIX for the next month. The extremely low VIX readings of the past 6 weeks are likely history.