VIX Futures Basis Trading: The Calvados-Strategy 2.0
Sibyl-Working-Paper, Jan 2014
16 Pages Posted: 16 Jan 2014 Last revised: 21 Jan 2014
Date Written: January 21, 2014
I developed in a previous working paper the Sidre and Most-Strategy. The strategy relies on the typical termstructure of VIX futures. The Calvados is a refined and condensed version of these strategies. The starting point was a paper of Simon and Campasano. The authors demonstrate that the VIX futures basis does not have significant forecast power for the change in the VIX spot index, but does have forecast power for subsequent VIX futures returns. It is especially profitable to short VIX futures contracts when the basis is in contango.
The original Calvados working paper presented improved metrics and parameter settings of the Simon&Campasano approach. The current working paper improves the original work in several points and extends the historic backtest.
The overall patterns of the original results are reassured and improved upon. The Calvados is traded in the Sybil-Fund. It is so far the pick of the bunch. One gets a lot of fun for a medium dose of risk.
Keywords: VIX Futures Trading
JEL Classification: G13
Suggested Citation: Suggested Citation