ES calendar spreads & VIX

[jones247]

Has anyone taken note of the correlation between the calendar spread on the ES in relation to the VIX? I'm aware of the inverse correlation between the VIX and the S&P; however, I was hoping that a similar correlation existed with the ES & VIX.

Thanks,

Walt

 

[nazzdack]

1) The calendar spread is a function of short-term interest rates with respect to dividend rates.
2) A high VIX can create a wider bid-ask spread on outright contract months.
3) The VIX can collapse while the market remains at "low" levels.

 

[sammybea]

I noticed the ranges getting smaller on the ES.. Will this help the VIX collapse to "reasonable" levels?

 

[nazzdack]

1) The market has to maintain a "large" daily range in order to support a "high" VIX. Otherwise, traders will aggressively start to short-sell option premium.
2) Some range compression can be expected because of the holidays. That should cause the VIX to drop.