Short-term VIX Futures Performance
March 30, 2012 - Commodity Futures, Volatility Effects
In general, when the U.S. stock market goes down, the S&P 500 volatility index (VIX) goes up. VIX is not investable, but VIX futures are available. Are short-term VIX futures a good way to hedge equity market declines and guard against market blow-ups? To investigate we focus on returns from holding the contract nearest to maturity, rolling to the next nearest on maturity dates. For simplicity, we assume that rolling is frictionless (favorable to futures) and that available capital always matches a round number of futures contracts (no residual cash). Using daily levels of VIX and daily settlement values of all VIX futures series from late March 2004 through late March 2012 (eight years), we find that: Keep Reading