Massive Contango Looms in VIX
12/25/2015 8:00 am EST
Though the move down in them has been large, Andrew Giovinazzi, of OptionPit.com, points out that the VIX futures have yet to collapse and highlights what the large contango might suggest heading into the long holiday weekend.
It sounds scary but it is not.
The Santa rally is in effect for now. SPY managed to eke out gains for the year helped not one wit by AAPL. The late in the year commodity rally is not hurting either. OPEC says oil will be back to $75 in 2019—or whatever—and that was enough to lift crude a buck or two. The story is still volatility as most of the headline volatility products are still showing signs of life. That means the VIX futures have yet to collapse.
Granted the move down in them has been large but we still are not to the levels we saw a couple of weeks ago. That leaves us with big contango as the VIX futures close higher in anticipation of the Weekend Effect kicking into high gear Wednesday. We might even see the VIX Jan future below 17 by next week.
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By Andrew Giovinazzi, Chief Options Strategist, OptionPit.com