Vol Index Relationships Normalizing

Over the last 6 months vol indexes have gone topsy turvsy.  We have seen RVX trading at discount to VIX,  VIX trading above and below VXN, and VXN trading all over the board.  Traditionally,  VXN and RVX have moved together in somewhat similar fashion, and have traded at a premium to VIX.  VXN is normally 2-3 points higher than VIX and RVX is typically 3-6 points higher than VIX.  However, those spreads were out the window.  They are not anymore:

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VXN is Cheap, VIX is Not

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The VIX is trading around 12, which implies that the market is going to move about .75% a day, if it is priced perfectly.  In the last two days, the SPX has moved about .66% and over the last 10 and 20 days it has moved less than 7%


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As Vol Drops VXN-VIX Spread Holds


As vol rallied earlier this week, it was noted by a few people that the spread between SPX vol, the VIX and NDX vol, the VXN is at its widest point in years.  One might think that with the NDX calming down and VIX moving back to the sub 14 level that the spread would have tightened significantly...it has not.  Take a look:


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Is if Time to Buy NDX Vol?

One of the things we concentrate on in our option mentoring is trading indexes.  There is plenty to be made in the index space, typically on the short premium side.  In the case of all the indexes IV has been overpriced for so long,  all the way down to these levels, and continues to be overpriced.    Index IV has been overpriced for going on a year and half and there is no end in sight.  Perhaps the worst offender is NDX, especially in the past few weeks.

Take a look at the way the Index has moved since the beginning of the year, or more...HASN'T moved.  

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What Effect Will AAPL have on the Volatility Indexes

With all of the AAPL excitement over AAPL earnings, I thought I would skip the discussion on the price action of AAPL earnings on the SPX and the NDX.  I am even going to skip the discussion on the affect of AAPL earnings on VXAPL.  Instead I thought it would be interesting to discuss the ramification of AAPL earnings on the major volatility indexes themselves.

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