The CBOE Volatility Index finished last week at its lowest close in more than five years as the S&P 500 spiked higher in the final 5 minutes of Friday's session.
The VIX ended the day at 13.45, down 0.84 points, or 5.9 percent--a closing level not seen since June 2007. The S&P 500 gained 2.65 points to 1418.16, just below its 52-week closing high of 1419.04 set on April 2. The two indexes usually move inversely.
Many are questioning why the VIX is so low. The answer is mostly that there is no real volatility in the S&P 500. The 10-day historical volatility for the SPX is down near 9 percent, which means that the current VIX carries a 50 percent volatility premium.
The VIX futures also fell. The August contracts were down 0.80 points, or 5 percent, to 15.10 with just two trading days left until they settle. September futures shed 0.60 points to 18.15.
The VIX futures are carrying large premiums to the spot VIX, and the so-called contango--the increase from nearer-dated contracts to later ones--is significant. Those futures are being traded very actively and twice this week set new open-interest records.
More than 444,000 VIX options changed hands on Friday, with 290,000 calls. The iPath S&P 500 VIX Short-Term Futures ETN (VXX) traded more than 242,000 options, led by 127,000 puts.
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