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
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: Suggested Citation