VIX Futures - Anomaly in Oct '20 Contract Price?

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Bobby T

I've traded various volatility related products for several years, and follow the VIX curve closely.

I've noticed the October 2020 is priced much higher than the surrounding contracts (i.e. Sept or Nov contracts). From a historical perspective, the spread between a long dated VIX contract and its surrounding contracts has never been this wide (except briefly in the fall of '08); so for the spreads to remain wide for a couple weeks in a row is extremely rare.

What am I missing by thinking the Oct contract is overvalued relative to Sept & Nov contracts?

As an additional note, the VIX forward curve has historically only had 9 contract months. This is the first time it's had 11, so never before have you been able to trade Oct or Nov in January. Also, I find it odd that the CBOE, who sponsors these products, doesn't list Oct or Nov contracts on their website.

http://vixcentral.com/
http://www.cboe.com/products/futures/vx-cboe-volatility-index-vix-futures
 
OK, do you pay attention to the news ? What will happen in November that might cause volatility in late October ?

I see VXV20 and VXX20 contracts at the CBOE website.
 
Ha! Yes, I'm very aware of the timing of the elections, which obviously occurs between the Oct & Nov contract expirations. What I'm struggling to understand is why the relationship between the two contracts has broken down. For example, if the argument is October's contract is highly priced because of the election, wouldn't you expect the Nov contract to also be similarly priced since there's the same election result uncertainty?
 
Bobby T said:
Ha! Yes, I'm very aware of the timing of the elections, which obviously occurs between the Oct & Nov contract expirations. What I'm struggling to understand is why the relationship between the two contracts has broken down. For example, if the argument is October's contract is highly priced because of the election, wouldn't you expect the Nov contract to also be similarly priced since there's the same election result uncertainty?
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I don't think that is necessarily so. The Vix future is the expectation of what the Vix "underlying" will be at the expiration of the contract. So the Nov Vix future will expire a bit after the election, when the outcome is known. The Oct will expire before the election, based on the Nov Spx contracts, which it is assumed will be high just before the election.
 
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