Jul 17, 2010

Week in Volatility

Mixed movement in volatility - VIX is up, VSTOXX down. S&P lost 1% for the week - rose 2% to an intraweek high on Tuesday, stayed flat, and declined sharply 3% on Friday, which also was an options expiration day. EURO STOXX 50 lost 1% for the week - is rose steadily for four days, but declined 2% on Friday. World volatility indexes on average rose 1.5 points, or 7%.

This week I have added a graph of VSTOXX futures. It is the first time that I've seen the dynamics of two tradable volatility indexes side by side. The scale on both plots is the same - as you can plainly see that VIX rose pretty much in parallel across all months, VSTOXX index actually declined, while VSTOXX futures rose only moderately. What is interesting is that both contracts have a relatively cheap December volatility. Meanwhile FT Alphaville is predicting the end of the world in October.

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