Strange Vix Futures values?

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

  1. sellvol

    sellvol

    What you refer to "out of line" isnt necessarily a divergence from fairval. VIX curvature isnt always linear whether in backwardation or contango. I've seen \_/ curves, /\/\ curves, \/\/ curves, \_ curves, you name it. Even if we assume that "fairval" is model independent, many factors influence the exact shape of the curve i.e. proximity to cash, FOMC meeting, supply/demand(illiquid months), etc. There are sometimes divergences that are tradable but this isnt one of them. The Nov contract is the front month contract and given the distance to cash and the fact that we have an important FOMC date before expiry it is pricing "expected" vols accordingly. There is no arb here, nor is there any edge present anywhere on the current VIX curve.
     
    #11     Oct 22, 2007
  2. fisho

    fisho

    Good, This is a reasonable answer. I never wrote that it is a free lunch just a bit unusual situation.
     
    #12     Oct 22, 2007
  3. fisho

    fisho

    MTE market makers and institutions are on every market so why do you trade at all ? I agree that there are not ARBITRAGE opportunities but all other strategies try to get a probabilistic edge ...
    ciao a tutti
     
    #13     Oct 22, 2007
  4. MTE

    MTE

    Hold on a sec. First you claim it to be an arb and now you're saying it's not!? You said it yourself in the intial post:

    "not fair value" is defined as ARB, unless you have some other definition for it!?

    My point was regarding no ARB, nothing else!
     
    #14     Oct 23, 2007
  5. On the topic of backwardization, it seems that equity indices and their futures contracts are in backwardization. I've not been able to find any references of this in equities (metals and other markets yes, but not equities). Any thoughts on why?
     
    #15     May 20, 2009