Over the last week, the S&P 500 has basically been flat. In that period, VIX spot has actually moved slightly higher, finding something of a floor in the 12.50-13.00 area. In the meantime, VIX front-month futures have declined, while farther-dated futures are higher than they were a week ago:
Here is the snapshot on October 25th:
Compare that to today’s snapshot:
The term structure of the VIX futures curve is thus steeper. VIX traders are anticipating a continuation of the low volatility environment for the balance of 2013. The rise in the Feb-Jul VIX futures, albeit small, might reflect traders’ unwillingness to sell much protection in the new year, along with the potential risk of renewed fiscal gridlock in February.
All of that said, realized volatility for the S&P 500 has declined to near the lows of the year, reflecting a calm environment with lower volumes than the bulk of the past 6 months. Here is 10 day realized volatility for the SPX:
Unless realized volatility picks up significantly, short-term, simple long premium structures look expensive for now in the S&P 500.