I like being surprised and perplexed when I look at the week over week changes in volatility indexes. What has me really scratching my head is the difference between VXST and VIX. VXST was down slightly last week while VIX rose over 5%. That’s where I start to wonder what is up. I could understand VIX up slightly and VXST down a little (or vice versa) based on the S&P 500 being hardly changed last week. However, we got some news on the horizon with an FOMC announcement Wednesday and the July employment number out before the market opens on Friday. If I knew VIX and VXST were going to diverge last week I would have guessed VXST would have been higher and VIX would have been down from Friday to Friday.
Continuing on with the VXST observations, the futures curve finished the week displaying a very ‘normal’ shape. Again I’ll refer to next week’s big economic news. I would expect the August 6th future to stand out a bit on the upside relative to the other contracts. Maybe it is too early and that shift will occur Monday or Tuesday, but since VXST futures trading is still relatively new, what is normal or to be expected from the curve price changes is a work in progress.