Negative Vix premium signals vol spikes, research finds

Rob Mannix
@RobMannix
20 May 2020

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Investors betting on market calm might want to pay closer attention to the premium in futures contracts linked to the CBOE Volatility Index.

Vix futures typically trade at a premium to the index but inexplicably cheapen ahead of bouts of volatility, new research from Ing-Haw Cheng, a professor at Dartmouth College’s Tuck School of Business, reveals.

When this happens – as it did during the market selloff in March – volatility sellers should reverse gears and go long volatility, Cheng says.

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