The Information Content of the VIX Options Trading Volume

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: 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