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Intraday momentum in the VIX futures market

Author

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  • Huang, Hong-Gia
  • Tsai, Wei-Che
  • Weng, Pei-Shih
  • Yang, J. Jimmy

Abstract

This study examines intraday momentum in the unexplored VIX futures market and verifies its existence through various empirical tests. The intraday momentum of VIX futures appears to be robust across contracts with different expirations, intraday returns with different time intervals, different trading sessions, and multiple sub-periods. We propose that the hedging demand of VIX option market makers may contribute to the intraday momentum. Our empirical evidence shows that intraday momentum persists only when the net gamma exposure of VIX options is negative and the effect weakens when European investors are away from the market, supporting our proposed explanation. Strikingly, we also find that trading strategies based on intraday momentum can generate an average annualized return of up to nearly 18%.

Suggested Citation

  • Huang, Hong-Gia & Tsai, Wei-Che & Weng, Pei-Shih & Yang, J. Jimmy, 2023. "Intraday momentum in the VIX futures market," Journal of Banking & Finance, Elsevier, vol. 148(C).
    • Handle: RePEc:eee:jbfina:v:148:y:2023:i:c:s0378426622003260
    DOI: 10.1016/j.jbankfin.2022.106746
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    More about this item

    Keywords

    Intraday Momentum; VIX Futures; Hedging demand; Net gamma exposure;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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