This is what happens at the end of the expiration cycle. While the VIX futures cling to a decent size premium considering the time to expiration, a VIX upside move has less of an impact on the futures. There is still a buffer between spot VIX and the futures that will absorb 6% VIX moves like today.
It should be noted that for spot VIX calculation, the roll occurred last Friday. Due to this, the  May factor in the VIX equation gets a negative number. The VIN or near month vol, and the VIF, next month vol, set up something like this in the formula:
1.25 x April – .25 x May
This rolls off during the week to get to 1-1 by next Monday. This is so that the VIX escapes odd behavior due to opex week, yet it depresses the VIX a bit due the heavier value being the outer expiration.
The VXX on the other hand, was marked down after the close yesterday due to the roll toll, and that hampered it’s price today. Anyone toying with the vehicle in any way should at the bare minimum know what its indicative value is; this is the value of the futures it holds, and is updated continuously:
 http://finance.yahoo.com/q?s=%5EVXX-IV
With spot VIX at 12.27, here are the futures:
| Symbol | Contract | Month | Time | Last | Change | Open | High | Low |
|---|---|---|---|---|---|---|---|---|
| VX H3-CF | S&P 500 VOLATILITY | March2013 | 16:43:25 | 13.25 | 0.24 | 13.20 | 13.95 | 13.05 |
| VX J3-CF | S&P 500 VOLATILITY | April2013 | 16:43:24 | 14.80 | 0.32 | 14.65 | 15.30 | 14.54 |
| VX K3-CF | S&P 500 VOLATILITY | May2013 | 16:43:24 | 15.80 | 0.24 | 15.65 | 16.20 | 15.60 |
So, the VXX closed too high yesterday relative to its indicative value, the futures absorbed the VIX move higher with only days to expiration, and therefore you have a 1.5% move in the VXX.
Trade/Action:
Nothing. Looking to add a VIX position for next month, be we will watch this week’s behavior in the market and in the VIX. Still holding VXX $19 puts and the VIX calendars opened yesterday to take advantage of the decaying March short legs.
They VXX $19’s fell 7 cents today, but with the futures much higher than spot, we will watch how these two converge before we close it out. It is still very possible that these improve over the next week, but if the market breaks down significantly in the interim, then there may not be much more in them.
Outlook:
This is historically a quiet week for markets and the VIX, and the snoozefest over the last two days has done nothing to alter that view. No real data points on the horizon with market moving power this week. Retail sales have been foreshadowed by store comps and earnings guidance. Friday sets up as very bullish historically.
