During a mentoring session today, an options mentoring student of mine mentioned that IV was definitely in today.  It was at that point that I had to ask: "Was It?" This is more because of the IV number I saw than anything.  On the open with the SPX mostly flat I noticed quickly that the VIX was quoting around .75, about where it ended up closing today actually (down .81).  When the VIX is down on a Thursday in the range of .60-.85, it always seems fishy to me.  That is because that is about what the VIX should read when traders discount out the weekend.  I wondered if, today, traders didn't simply move today's date to Saturday already. 

To find out, we can compare IV on the downside of the curve (options that have little decay this weekend), relative to the drop we saw in ATM options.   If it was weekend decay, we should notice that downside puts retained a large portion of their IV relative to ATM options a ratio based on the vega of the two options (Vega of Put/Vega of ATM Option).  Skew will seem to steepen.  If it was not weekend decay we may see a relative shift across the whole curve.  Here is the process:

First letís calculate how much the VIX should lose this weekend:

Net decrease in VIX from weekend: .78%

Now, letís multiply this number, by the difference in vega's between the 1200 put (vega of .54) and the 1305 put, in March (this is a short cut I should use both March and April, but I am lazy). 

.77*(.54/1.27)=.32%

If today's volatility reduction was only weekend affect then we should see a decrease between Wednesday's put volatility and yesterday by .32!  Here is Wednesday's curve: