Yesterday, the 9-day Vol Index dropped from 14.68 to 9.83! This was not some arithmetic quirk with expiring options or a holiday or anything like that. This was a true drop in the price of near-term $SPX options. $VIX9D is based on the Sept 27th and Oct 4th expirations. $SPX was essentially unchanged yesterday (down 23 cents). Here is what happened to the at-the-money put – the 2990 strike:
|Date:||Friday, 9/20/19||Monday, 9/23/19||Change|
|$SPX Sept (27th) 2990 put’s bid price||20.40||11.60||–8.80|
|$SPX Oct (4th) 2990 put’s bid price||29.70||21.80||–7.90|
|$SPX Oct (11th) 2990 put’s bid price||36.80||29.50||–7.30|
Of course, that is just one strike. The Volatility Index calculations involve all of the strikes that have bids and offers – so, literally hundreds of them in the case of $SPX. Those are the facts, but what caused this? I have no idea, but you can see from $VIX (the 30-day vol) and $VIX3M (93-day vol) that it didn’t extend out to those expirations. It’s like someone rang a bell and said, “Okay, start selling the heck out of the $SPX options, now that the September 20th expiration is out of the way!”
One other side effect: the term structure of the CBOE Volatility Indices is now very steep – a fact which is not reflected in the $VIX futures term structure. The nearest term $VIX futures contract – expiring tomorrow September 25th – settled at 15.22 yesterday, and next week’s future settled at 15.85. Those are well above the 9.83 level of $VIX9D..
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