Dan Mikulskis'  Instablog

Dan Mikulskis
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I advise institutional investors on investment strategy and using derivatives. In previous roles I've modelled and traded volatility products across FX and equity markets.
  • VIX Snapshots : Then And Now 0 comments
    Mar 29, 2013 1:07 PM | about stocks: VXX, UVXY

    The chart here illustrates the level of the VIX, and VIX futures curve on March 26 in each of the last 6 years (source: Vixcentral.com), and although it doesn't include some of the earlier history of the VIX, its pretty interesting.

    (click to enlarge)

    A few observations jump out :

    - The current level of the VIX and VIX futures curve is pretty similar to where it was in March 2007, other than a slightly more upward sloping futures curve now implying a higher cost of carry of a long VIX futures position

    - Indeed the development of a clear upward- sloping bias to the VIX futures curve is something that's happened since 2009. No doubt the launch and strong asset inflows into VIX ETPs such as the VXX, which follows a systematic strategy of buying VIX futures have fuelled this

    - Its quite surprising looking back that in March of 2008 there was actually a downwards sloping bias to the VIX futures curve, perhaps an indication of the complacencies that existed at that point in time.

    - The most upward sloping futures curve of the time points studied was in 2012, where there was a massive 7 volatility points difference between the first and fourth futures (15 vs 22)

    - what we saw between 2010 and 2012 was overall a very slight move down in the level of the VIX and the front month futures (although with notable spikes in May 2010 and August 2011 - see second chart), but the longer term futures remained at eleveated levels

    - What we've seen in the last 12 months are these longer term VIX futures also falling, the VIX itself has also fallen, but by much less

    (click to enlarge) please follow me on twitter @danmikulskis

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: VXX, UVXY
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