VIX, VIX futures and the S&P 500 all moved higher last week. It happens, but with a couple of major economic events/numbers behind us (FOMC / 3Q GDP) and stocks moving up (although slightly) it was a bit surprising to see all that green when compiling data for this blog.
The curve below is a comparison of generic VIX futures based on the number of days to expiration. For example, Week 1 for the 10/23 curve was the October 28th contract while on the 10/30 curve it represents the November 4th VIX futures. The shift higher in VIX futures was across the board with the short dated futures moving up as well.
VIX Weeklys futures were launched back in late July with the options following more recently on October 8th. The first set of VIX Weeklys options settled this past Wednesday and the open interest for the October 28th options was well over 100,000 at settlement. As of Friday the open interest for VIX Weeklys options expiring this coming week is over 106,000. The table below shows the top five Nov 4th VIX options ranked by open interest.
As I noted above VIX Weeklys futures have been around for almost three months. The anticipation was that these contracts would closely follow the level of the spot VIX index. I’ve been compiling five minute VIX data and the bid and offer for the contract that expires in just a few days to see if that the assumption of how the futures were going to behave relative to the index is holding up in the market. So far the correlation between the index and mid-point of the futures bid-ask has a correlation of around 0.98 using 5 minute data and rolling to the next week’s contract on the close the afternoon before settlement. If you are more of a visual person check out the chart below which is a comparison of VIX and the futures for the last three months.