VIX Futures Calendar Spreads

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.