Futures in Volatility: Market Summary and Analysis


The broad stock market, as measured by the S&P 500 Index (SPXSM) finally had a pullback.  However, the CBOE Volatility Index (VIX) responded only in a modest upward fashion.  As a result, the VIX futures have retained the same steep slope to their term structure.  That is, it will likely be business as usual until either a) the market falls so sharply that the term structure flattens, or b) SPX (put) option buyers finally give up on their strategy and allow the implied volatility of those options to decline.

The November VIX settlement was at 22.21, a level more or less in line with the median previous readings since August, 2007. Figure 1 shows the entire history of the monthly VIX settlement prices, since the inception of futures trading in May 2004 (trading first began in March, 2004, and the first contracts that settled were the May, 2004, futures).  The symbol for the monthly settlement price is VRO…

The full Market Summary and Analysis can be found in The CFE’s Futures in Volatility Newsletter Volume 4, Issue 11.