As I’ve noted on many occasions here, the relationship between spot VIX and longer-dated VIX estimates has not “worked” as a directional indicator for at least several months. [7,8] This looks like a genuine puzzle: the premium VIX futures traders are willing to pay and/or requiring in order to sell is too steep and has been too persistent to be dismissed as a phenomenon typical of the “wall of worry” that bull markets proverbially climb. But neither is that premium indicative of some impending crisis -at least, it wasn’t this summer and hasn’t been this fall. It is tempting to suppose that the effects of artificial government liquidity are overwhelming whatever information this relationship would otherwise provide. But whatever the cause, I won’t regard the VIX term structure data as meaningful until there is some new reason to do so.
RVX futures haven’t updated for a few weeks now; if there isn’t any volume next week, I will drop that chart from the report.
Options on gold have been relatively expensive lately -even with the news-making price moves, option buyers haven’t received much of a realized volatility bang for their implied volatility buck. Ratio trades involving net sales of out of the money calls are one way to play the realized/implied imbalance as well as the vertical volatility skew. [12,13]
Options on USO, the crude oil ETF, have been fairly priced in recent weeks in implied volatility terms. [16, 17]