In addition to seeing a steep term structure in the implied volatility of S&P 500 options, you can see the same phonomenom in the VIX futures curve. A simple way to make this obvservation is to compare the curve today versus the curve in late June of 2011, right before the European crisis caused a strong pullback in the equity markets. What you will notice is that the front month VIX futures contract was approximately the same level at about 20.6. What is different is the extreme difference between the 1st month and the 6th month. Today, that gap is about 6.5 vol points. In June 2011, the gap was about 3.5 vol points:
Neat observation, but what does it mean? It means that the carrying cost of both VXX and VXZ is quite high. Holding VIX futures while the curve is this steep is a losing proposition.
