StockFetcher Forums · Stock Picks and Trading · VIX, SPY and some observations.<< >>Post Follow-up
guspenskiy13
976 posts
msg #122223
Ignore guspenskiy13
12/12/2014 10:56:13 AM

As I shifted my attention from VIX ETPs into their basis - VIX futures and focused on possible arbitrage of different contracts, I've observed something interesting.

On Friday December 5th, 1st to 2nd month contango has hit a record 12.87%, the highest YTD. On Monday it had intra-day high of 12.915....and then....

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Knowing that 1/2 month contango has been substantially (by 3 to 4%) higher than 13% only for 2 days in the past 2 years, this was a solid risk/reward opportunity....oil/energy slide was just a catalyst....

P.S.

This might be just a coincidence.



guspenskiy13
976 posts
msg #122225
Ignore guspenskiy13
12/12/2014 12:18:39 PM

The relationship of vix futures and their structure is obvious - since the structure is only in contango ~20% of the time (much less if we don't include 07-08), it makes sense to short volatility at such times.

But could the high degree of contango signal a turning point for SPY, or at least for VIX futures?

It is hard to calculate mathematically, because comparing current contango to /VXZ4 while plugging as a ratio we just divide the second month future by the square of the first month.

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Visually, it does seem that the term-structure of VIX futures is range-bound and gives a good signal on whether 1st/2nd month futures will converge/diverge from each other.



StockFetcher Forums · Stock Picks and Trading · VIX, SPY and some observations.<< >>Post Follow-up

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