The Information Content of the VIX Options Trading Volume

Journal of Futures Markets, Forthcoming

37 Pages Posted: 22 Dec 2021 Last revised: 25 Apr 2023

See all articles by Chen Gu

Chen Gu

Shanghai Business School - Research Center of Finance

Xu Guo

Shenzhen University - College of Economics

Alexander Kurov

West Virginia University - College of Business & Economics

Raluca Stan

University of Minnesota - Duluth

Date Written: November 30, 2021

Abstract

This paper investigates the predictive content of the VIX options trading volume for the future dynamics of the underlying VIX index. Using a novel dataset from the Chicago Board Options Exchange, we calculate the put-call ratio based on the VIX option volume initiated by buyers to open new positions. We show that the put-call ratio negatively predicts the subsequent changes in the VIX index. The predictability is stronger during periods of elevated VIX levels and for short-dated contracts. These results support the hypothesis that informed traders use the VIX option market as a venue for their trading.

Keywords: VIX options, put-call ratio, information, volatility

JEL Classification: G10, G12, G14, G15

Suggested Citation

Gu, Chen and Guo, Xu and Kurov, Alexander and Stan, Raluca, The Information Content of the VIX Options Trading Volume (November 30, 2021). Journal of Futures Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3975868 or http://dx.doi.org/10.2139/ssrn.3975868

Chen Gu

Shanghai Business School - Research Center of Finance ( email )

Shanghai
China

Xu Guo

Shenzhen University - College of Economics ( email )

5th Floor, Wenke Building
3688 Nanhai Road
Shenzhen, Guangdong 518060
China

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Raluca Stan

University of Minnesota - Duluth ( email )

1049 University Drive
Duluth, MN 55812
United States

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