SPX futures are higher by 1.5 points to 2075.25. The odds of the Fed raising rates by year-end climbed to 50% from 33% in early October (Bloomberg). About half of the S&P has reported earnings with 2/3rds beating estimates. The energy sector is expected to be this season’s underperformer with estimates dropping 65% year-over-year. The spot VIX finished 15.07 on Friday. The VIX futures are ever so slightly lower across the board on the positive equity tone this morning.
The final week of October saw the spot VIX move up roughly .61 points to 15.07. The VIX futures, however, only moved up by 1/8th of a point across the board in a very slight parallel shift. One-month S&P 500 Index realized volatility has dropped back to 11.8%, within 1 percentage point of levels that we saw right before the August 24th vol pop. That August vol pop brought a very distinct peculiarity not seen before. Recall that back in late August, we saw the VIX close higher than the RVX (Russell 2000 VIX) for the first time ever. Now, however, the RVX has moved back in line at a 4+ point vol differential (graph below). The 5-year average is right around 4.9, while the 10-year average spread differential is 5.7 vol points.
In a nutshell, the VIX has simply been more volatile than the RVX lately. This abnormality is most easily seen via the implied volatility in VIX options. Afterall, VIX options price off the volatility of the VIX futures. The VVIX is disseminated by the CBOE and represents the expected volatility of the 30-day forward price of the VIX Index. The VVIX is the VIX of the VIX. Back on August 24th, the VVIX hit an all-time high of 168.75. But similarly to the RVX-VIX spread, we have reverted back to more ‘normal’ readings. The 5-year average of the VVIX is 88.79. Presently, the VVIX is sitting at 90.3.