We are getting to the point where the VIX and the futures can’t fall much more. Yet when they get this low, “much more” becomes a large percentage of the underlying. For example, while the VIX is 11.84, that one more point down represents an 8.5% fall in the front month. Conversely, would the VIX to jump to a normal 16, that would be a 35% leap. It’s a numbers game.
Add that to a 7 cent/day or so roll in the VXX, and the carnage can continue; or the jubilee for long XIV or short VXX/UVXY folks. You almost look at VXX puts and eye the total roll for the next two weeks to envision where the VXX will sit, since the market Pokies does not allow for down days of any significance.
|VX Q3-CF||S&P 500 VOLATILITY||August2013||16:46:18||13.05||-0.10||13.10||13.25||12.95|
|VX U3-CF||S&P 500 VOLATILITY||September2013||16:46:18||14.45||-0.20||14.63||14.65||14.35|
|VX V3-CF||S&P 500 VOLATILITY||October2013||16:46:18||15.50||-0.25||15.67||15.67|
The key here is watching September; when that bleeding stops, it is time to get long VXX in some low risk way, calendars, etc. People will fear the post-labor day, or approaching FED meeting market. But a lot of boredom, negative roll, vacation is between now and then.
Short post, since there isn’t anything to discuss when the sigma of the S&P was a couple points.