VIX was slightly lower despite the S&P 500 dropping a little last week.  I would not read anything into this slight market anomaly(both SPX and VIX dropping last week).  VIX actually showed the type of behavior we are accustomed to with equity implied volatility leading up to and after an earnings report.  Just think of the FOMC announcement as a kind of earnings announcement for the equity markets.

VIX Curve w Table

The September contract settled Wednesday last week and now October is the front month.  Despite the next FOMC announcement coming October 28th which is more than a week after October VIX contracts settle, the front month – second month VIX curve relationship remains in backwardation.

The generic table and chart below shows VIX and the next five expiring weekly VIX futures.  I roll the contracts to get a consistent week over week measure of the near dated contracts.  So far more of these charts have been pretty flat, which may be a function of VIX hanging out in the 20’s.  We only have about seven weeks of short term VIX trading data to work with, but so far the near dated contract closely tracks the spot VIX, especially on Monday and Tuesday.

VIX Weekly Curve

Thursday, after all the ziggy zaggy action was done a trader appeared to check their calendar and put on a bullish trade using November VIX options.  Specifically they purchased the VIX Nov 20 Call at 1.89 and sold VIX Nov 30 Calls for 0.72 and a net cost of 1.17.  The payout at November 18th AM settlement appears below, however, I always assume that a spike in VIX would result either an exit trade or some sort of roll to lock in some profits.  Finally, the comment about the calendar relates to November settlement being the next standard VIX settlement following a FOMC meeting.