Feb VIX Futures expired this morning at 13.07, the lowest VIX settlement since early 2007. It’s a brave new world, as SPX realized volatility has been around the 10 level for 2013 so far. As a result, the VIX at 13 does not seem so cheap.
In the last week, the SPX is up about 1%, and VIX spot is a point lower, but the entire futures curve has shifted as well.
Here is last week’s snapshot:
Compare that to today:
At first glance, there doesn’t seem to be much of a change in the future curve, but since Feb expired today, today’s snapshot starts with the March future. As a result, comparing the Mar future today vs. last week, you can see the decline of almost 1 point. A similar 0.5-0.75 point move lower for the farther out months has occurred as well.
In this low vol environment, each expiring VIX future gives way to a “rolldown” phenomenon, where the new front month futures contract has a similar value to the prior front month, but that means that each future loses a bit of value as it gets closer to being the front month future. That rolldown has continued this month, and the steepness of the futures term structure has hardly changed in the past week.