Has anyone taken note of the correlation between the calendar spread on the ES in relation to the VIX? I'm aware of the inverse correlation between the VIX and the S&P; however, I was hoping that a similar correlation existed with the ES & VIX. Thanks, Walt
1) The calendar spread is a function of short-term interest rates with respect to dividend rates. 2) A high VIX can create a wider bid-ask spread on outright contract months. 3) The VIX can collapse while the market remains at "low" levels.
I noticed the ranges getting smaller on the ES.. Will this help the VIX collapse to "reasonable" levels?
1) The market has to maintain a "large" daily range in order to support a "high" VIX. Otherwise, traders will aggressively start to short-sell option premium. 2) Some range compression can be expected because of the holidays. That should cause the VIX to drop.