The VIX has not moved much lower in the past week, despite SPX getting very close to 1600 on last night’s close. Part of it is due to higher realized volatility on a one month basis, but a major aspect of the elevated bid to options is the heavy economic calendar and central bank releases this week. We still have the FOMC this afternoon, the ECB tomorrow, and the U.S. payrolls report on Friday, which are all potential volatility-inducing events.
Here is last week’s snapshot:
Compare that to the current snapshot:
So despite the slow grind of the past week, VIX Futures across the curve are higher by 0.1-0.5 point. I am currently long a risk reversal in May VIX, mainly because I don’t think it is likely to go much lower than 13 over the next few weeks given the more precarious economic backdrop, and more importantly, the increased volatility in the commodity market. That volatility is evident once again today, with copper and oil, more economically sensitive commodities, leading on the downside. The low for May VIX Futures over the last month is around 14. As a result, the risk/reward of my current trade still looks quite favorable.