We all know the VIX has been in a range for some time. This blog has on several occasions argued that it may be that way for a while. Yet, even with the relatively stable and lower VIX traders have been pointing toward the 'vol of vol' for high option premiums. This is a somewhat flawed argument. Yes the VIX options do expire into a cash settle, but the real underlying is the VIX futures which are less volatile than the cash market even some of the more advanced programs look at HV in terms of cash VIX instead of the futures.
Based on how much things are moving around in the cash, VIX option premiums are at some of the most expensive levels I have ever seen. Take a look at the relationship of 20 day HV and 30 day IV in VIX options.
Connect With Us