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VIX option‐implied volatility slope and VIX futures returns

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  • Jungah Yoon
  • Xinfeng Ruan
  • Jin E. Zhang

Abstract

This paper documents the dynamics of the term structure of the implied volatility (IV) smirk of Chicago Board Options Exchange Volatility Index (VIX) options. Empirical analysis shows that VIX option–IV slope predicts VIX futures returns over the next day to month, outperforms existing investors' perception proxies in the stock and option markets. The empirical finding is rationalized through time‐varying correlation between the VIX and volatility of VIX (VVIX), VIX jumps, and investors' net positions in VIX futures market.

Suggested Citation

  • Jungah Yoon & Xinfeng Ruan & Jin E. Zhang, 2022. "VIX option‐implied volatility slope and VIX futures returns," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 42(6), pages 1002-1038, June.
    • Handle: RePEc:wly:jfutmk:v:42:y:2022:i:6:p:1002-1038
    DOI: 10.1002/fut.22317
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