Volatility Curves All Flat or in Backwardation

With pressure abounding in the financial markets volatility as a tradable asset had quite a day.  The CBOE Futures Exchange experienced the second busiest day in history as all six volatility indexes that have futures markets were up significantly.  The one day performance for each index was –

  • S&P 500 – VIX 20.49 +3.85 (23.14%)
  • NASDAQ-100 – VXN 20.06 +4.94 (32.67%)
  • Gold – GVZ 29.94 +7.41 (32.89%)
  • Oil – OVX 25.90 +5.92 (29.63%)
  • Emerging Market Index – VXEEM 35.48 +8.98 (33.89%)
  • Brazilian Market Index – VXEWZ 40.35 +6.50 (19.20%)

Seeing these figures is a good first step to paying attention to the tradable volatility markets.  However, the other piece of the puzzle and the piece that is often overlooked is what went on in the futures markets.  Today, basically the futures curves finished the day flat or in backwardation.  This is the type of market activity that is usually reserved for markets that are experiencing some real uncertainty over the near term.  Despite a few setbacks this year, the volatility markets have not been reacting like there was anything to worry about.  That was until today.

The volatility market curves based on 6/20/2013 settlement –

VIX Curves 6202013

The posts on this blog are opinions, not advice.
Please read our disclaimer for Indices.

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