Eli Mintz, the publisher of vixcentral.com, has published an analysis that shows the arbitrage relationship between Accushares’ VXUP shares and VIX Futures. It shows that investors can use VXUP shares to lock in a low risk position for any VIX Future expiration month.
What struck me about this analysis was the incentive to sell VIX futures that had a higher daily roll yield, regardless of what month expiration they are. This would tend to linearize the term structure of VIX Futures, and with a whopping 3 days of VXUP trading under our belts, this seems to be happening. Normally I would expect very heavy contango between the first and second month futures as we bump up against all time highs in the S&P, but instead the contango has decreased from last week.
This might just be an effect from the May futures expiration that occurred during this transition, but I think contango normally stays pretty consistent across expiration boundaries.
It could be that Accushares has unintentionally created a VIX futures term structure linearizer…