Strange Vix Futures values?

Discussion in 'Options' started by fisho, Oct 18, 2007.

  1. fisho

    fisho

    VIX: 18.51
    VIX NOV: 21.32
    VIX DEC: 20.98

    Is it normal ? There are dividends or what?
    There are srategies to take an edge on this behaviour if it is not the fair values.
    Fisho
     
  2. Please read up on how the vix is priced. These prices are correct and are fair value. Please don't trade them till you understand why.

    There are many threads on ET you can search and lots to read here with good links http://www.cboe.com/micro/vix/introduction.aspx
     
  3. You never heard of a future trading at a premium to the spot???? Even if you do not understand how VIX futures work and they are a different breed, at a minimum you should be aware that most futures trade at a premium, leaving out for right now markets with backwardation at times like oil futures.
     
  4. fisho

    fisho

    WAIT WAIT WAIT
    I am not a beginner I know how and why VIX futures are priced.
    It seems to me a little bit unusual inversion comparing to usual volatility structure:
    NOV > DEC > SPOT
    I think it is possible to STAT ARB on this using the IV on the options too.

    These are the prices :
    VIX: 18.51
    VIX NOV: 21.32
    VIX DEC: 20.98
     
  5. sellvol

    sellvol

    How exactly is this arb going to work? Can you enlighten us?
     
  6. fisho

    fisho

    For example buy a straddle, delta hedge + sell VIX@NOV + BUY VIX@DEC of course in the right ratio and at the previous days conditions ...
    I don't know exactly. I also need "enlightment". I am sorry I was misunderstood :(
    Fisho from Italy
     
  7. There is no arb here unless you are certain they are mispriced.
     
  8. ig0r

    ig0r

    Market just expecting higher vol in the nov forward (I dont remember perfectly, but I think these are 30 day forwards?) than dec, whats the problem?
     
  9. fisho

    fisho

    Thank you ! It is just like to say that it is not sunny if it's raining.
    The Vix term structure is often in a contango or backwardization situation (like now) so I was wondering if it is possible to exploit the "out of line" situation.
    Imagine if Vix spot =18 Vix NOV= 25 Vix DEC=21.
    Would you consider it normal ?
     
  10. MTE

    MTE

    Why would this be out of line? If the market prices it this way then it should be this way. I doubt the market makers and all the institutions that trade VIX futures have just out of the goodness of their hearts decided to leave some free lunch for you.
     
    #10     Oct 22, 2007