Friday, February 13, 2009

VXX and VIX Diverging

It has been an interesting week for volatility, with the VIX seemingly having a mind of its own and responding rather sluggishly to some of the major moves in the market. For the most part, VXX, the new VIX ETN, has been moving in concert with the VIX, if only at a rate of about 80% of the volatility index.

Today, however, marks the first significant divergence between VXX and the VIX since VXX started trading on January 30th. As I write this, VXX is down 0.84% for the day while the VIX is up 2.79% – a divergence which can be picked up in the ten day chart with hourly bars below.

I have no particular explanation for today’s divergence. For now at least, I merely wish to call attention to this phenomenon and keep an eye on it going forward.

[source: BigCharts]

Posted by Bill Luby at 8:53 AM

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