Negative Vix premium signals vol spikes, research finds

Unusual pattern seen in Covid crash could help volatility sellers avoid future reversals

Covid volatility

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.

Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.

To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe

You are currently unable to copy this content. Please contact info@risk.net to find out more.

Sorry, our subscription options are not loading right now

Please try again later. Get in touch with our customer services team if this issue persists.

New to Risk.net? View our subscription options

Register

Want to know what’s included in our free membership? Click here

This address will be used to create your account

Most read articles loading...

You need to sign in to use this feature. If you don’t have a Risk.net account, please register for a trial.

Sign in
You are currently on corporate access.

To use this feature you will need an individual account. If you have one already please sign in.

Sign in.

Alternatively you can request an individual account here