Thursday, July 9, 2015

Possible VIX Futures Scenarios

I wanted to do a quick simulation, for discussion purposes only, of the possible extent to which VIX futures could rise and fall into backwardation.

Ultimately I continue to believe we are limited to the upside here due to positive economics. If the economy does start to show weakness than it is just another excuse for The Feds to delay or tone down rate hikes and help the economy along. 

Again, these figures are rough estimates and meant to give you an idea of how far things could advance from here.

The current VIX futures term structure is below:

Here are my hypothetical points for F1/F2 futures and backwardation levels. Due to the nature of current events and their expected resolutions, I would expect higher backwardation levels.

In my articles I speak about wanting a 5-10% backwardation event. This is what that could look like. Again this is for illustration purposes only and I have pieced this together using historical VIX futures data.

During the writing of this article this happened:

It appears that Greece has offered a deal that sounds pretty good.

For now I am going to sign off and see how this plays out. It could make the above article completely irrelevant come tomorrow morning. 

Remember Janet Yellen speaks tomorrow at 12:30pm. 

Have a great night!

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