VIX dropped last week, which it tends to do when the S&P 500 is up 2%, but the futures curve remains in a state of backwardation.  The continued backwardation honestly surprises me when the risk everyone is talking about comes after September contracts settle on the open Wednesday of this week.  It may just be that there is more to be worried about than the pending Fed announcement.

VIX Curve Plus Table

The weekly VIX curve shifted lower as well.  Having five consecutive weekly VIX futures expirations is a new experience so I’m still getting a feel for the price action.  However, in the past when the curve has been flat I attribute that to lots of uncertainty, regardless of the level of VIX.  All the VIX futures on the orange line below closed with a 23 handle which means they are in a pretty narrow range.

VIX Weekly Curve Plus Table

Finally, I put a 5 minute price chart together showing the September 9th VIX future versus spot VIX from the time it became the next expiring contact (8:30 am September 2nd) to the market close the day before settlement (September 8th).

VIX Weekly Chart

Note the red line (futures) and blue line (spot VIX) track each other pretty closely.  You never know how a new derivative market will behave until it actually starts trading.  The expectation was that the near dated future would track VIX very closely offering the best method for replicating spot VIX exposure.  The chart above seems to affirm that expectation.