Lol no , you are now talking about lagging for milliseconds = arbitrage opportunity which is not what i was talking about ...
Right, so I have about 30mins tonight to cover this off.
I say that spotting a change in pace for the day on ES early is not reflected in Vix and presents a trading opportunity.
You disagree as you think that some form of arb would take place very quickly.
Let's look at some information then:
1) Both myself and Pedro asserted that the pace of the market changed at approx 11pm GMT last night when ES opened 7pts south of Friday's settlement price of 1553.50 for Jun '13. When I looked this morning, it was heading southbound.
2) Let's look here -
IVolatility.com - Services & Tools -> Analysis Services -> Basic/Advanced Options -> Basic Options
The implied vol from Friday 15th for Calls was about 8.62% and Puts 9.19% for 1555 on SPX. If my calculations serve me correctly this puts 1 Standard Deviation at about 7.25pts. Vix was correspondingly loitering around the mammoth 11.20 level, derived broadly from these put/call implied vol levels
3) The low of today was 1529.50 by the looks of it or just over 3 x SD from Friday's settlement price. That's one fairly big move and one, of you were a canny trader you would have taken advantage of if sensing a change in pace.
4) Looking at Vix tonight, it has reacted with a close to the almighty 13.36 level - barely a ripple in 'fear index'
So where was the arb supercomputer when liquidity levels on ES dropped greatly to allow a 3SD price movement (and back) in a day? Vix was asleep because the people who buy Vix didn't think today's move was serious but it did provide a very lucrative trading opportunity for those who can spot this kind of anomaly. There were 2m contracts traded today vs 1.6m on sleepy friday and those that saw an opportunity to take advantage of a mispricing did....
arb shmarb
<I thank you>