First, a quick discussion of the VIX quotes from early today. Just as the equity market opened the S&P 500 E-mini futures went limit down. Market makers in the SPX pit at CBOE use the futures for hedging purposes so it was difficult for the traders in the pit to asses where the equity market was going and this created a pause is quoting. Following the limit down situation there was spotty quoting in SPX and SPXW options so VIX values were not being disseminated. The VIX quotes that were being generated, but not disseminated, were extremely spiky. Once this spotty quoting began to smooth out CBOE began to disseminate VIX values. This occurred at 8:58 am or 28 minutes into the trading day. It should be noted that the regular session VIX futures and option trading commenced at 8:30 am.
Now on to the day. VIX closed over 40.00 for the first time since early October of 2011. Also, and I steal this from Wallace Witkowski from MarketWatch who informed me this was the first time in history that VIX was up over 40% two days in a row. For that to happen you have to start with a pretty low base and have two consistently volatile days in a row. I think that describes what we all just lived through. Looking at the traditional VIX curve the September contract, which settles on the 16th lagged the index only rising 26% to settle at 25.125.
Taking a look at the shorter term contracts, the August 26th VIX future, which settles on the open the day after tomorrow, moved higher by over 50% to play some catch up with the spot VIX index. We thought that the Weeklys would track VIX closely and this current market selloff and subsequent spike in volatility is proving that theory right.
A final look at S&P 500 Volatility appears below where the 9-day, 30-day, 3-month, and 6-month volatility index price changes from Friday to Monday are on display. VXST rose 40% to 54.61, as we know VIX was up by 45% to 40.74, VXV gained about 33% to finish at 31.14 and VXMT was higher by 22.5% to finish the day at 27.36. Across the board volatility was higher and when we see 3 month volatility in the 30’s you have to wonder if traders believe the past couple of days are just the beginning of a very rock ride for the equity markets.
One other market I want to note is the CBOE Russell 2000 Volatility Index (RVX) which finished the day at 39.63 just a tad lower than VIX’s final print of 40.74. Those of us that eat, sleep, and dream about volatility know that RVX is always at a premium to VIX. That truism is true no more as today was the first time in the 2,931 day trading history of RVX that it closed lower than VIX. We are most definitely in unusual times.