Wednesday, February 26, 2014 2:30:57 PM
"vix at 13.9
uvxy is 64
front 2 month contango is 6.7%(x2= 13.4%)
exp decay ~1
so uvxy at march expiration should be ~ $55 if things stay the same? "
lifter:
Forget contango; focus on back month.
If the VIX closes at expiry at 13.9, expect the back month to close at ~ 14.5 in the ballpark of last month's data at bottom.
That would be ~ $1.15 drop from $15.64, or a 7.35% drop.
Double that to 14.7 and add another .5- 1% ß decay.
Yes, ~$55 if things stay the same. (64 - 15%)
But you got the right answer the wrong way.
I surmise that you pulled "front 2 month contango" from VIX central. You most likely meant spot to back but you pulled up front to third (May).
Doc
current:
VIX 13.97 +0.30
VX H4-CF 15.17 +0.27
VX J4-CF 15.64 +0.34
2/18/14 (expiry)
VIX 13.87
FRONT 14.25
BACK 14.45
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