VIX Futures Calendar Spreads

44 Pages Posted: 16 May 2017

See all articles by Ai Jun Hou

Ai Jun Hou

Stockholm University

Lars L. Norden

Stockholm University - Stockholm Business School

Date Written: May 12, 2017

Abstract

A VIX futures calendar spread involves buying a futures contract maturing in one month and selling another one maturing in a different month. VIX futures calendar spreads represent a daily turnover above 500 million dollars, or roughly 20% of the total VIX futures trading volume. A calendar spread trade is a bet on the change in the slope of the volatility term structure. We find that speculation, rather than information about changes in the slope of the volatility term structure, is driving calendar spread trades. On average, a calendar spread costs a little less than $100 (about 15 basis points). If settled at the end of the trading day, 43% of the calendar spreads are profitable.

Suggested Citation

Hou, Ai Jun and Nordén, Lars L., VIX Futures Calendar Spreads (May 12, 2017). Available at SSRN: https://ssrn.com/abstract=2968918 or http://dx.doi.org/10.2139/ssrn.2968918

Ai Jun Hou

Stockholm University ( email )

Universitetsvägen 10
Stockholm, Stockholm SE-106 91
Sweden

Lars L. Nordén (Contact Author)

Stockholm University - Stockholm Business School ( email )

Sweden

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