Berlinda Liu on Deciphering VIX Futures Term Structure

On Wednesday at the 31st Annual CBOE Risk Management Conference in California, Ms. Berlinda Liu, Director of Index Research and Design, S&P Dow Jones Indices, delivered a presentation entitled Deciphering VIX Futures Term Structure.

In her presentation Ms. Liu noted that —

  1. When VIX is in Contango, the term structure is upward sloping; Shorter-term futures are cheaper than longer-term futures; Long positions suffer from roll cost; and Short positions collect positive carry.
  2. When VIX is in Backwardation, the term structure is downward sloping; Shorter-term futures are more expensive than longer-term futures; Long positions collect roll yield; and Short positions have negative carry.
  3. VIX futures term structure is not always 100% in contango or 100% in backwardation, and Rolling from shorter term VIX futures to longer term futures may have positive carry in one part of the curve and negative carry in other parts of the curve.
  4. One can use the slope of the term structure curve as a trading signal to go short VIX or long VIX.
  5. “Curvature” is essentially “Slope Plus,” or the difference between the slope in the near end and the slope in the far end of the futures curve.
  6. Only on about  7% of trading days the curvature and the near‐end slope point to opposite directions of the trade.
  7. In the transition from contango to backwardation around the time of the downgrade of Traseury debt in August 2011, curvature changed its signal direction (to suggested long position in VIX) two days ahead of slope.


Berlinda Liu is a Director, Index Research and Design at S&P Dow Jones Indices, responsible for volatility, housing and other derivative-based indexes and strategies, and other quantitative index research and design.  Berlinda joined S&P Dow Jones Indices in December 2007.  In 2007, Berlinda was an equity derivatives strategist at Bear Stearns in London. From 2005 to 2006 Berlinda was an equity derivatives strategist at Credit Suisse in New York. From 2001 to 2005 Berlinda was a business analyst at Credit Suisse in New York.  Berlinda holds a B.A. in International Business Management from Wuhan University of China, an M.S. in Information System Management and an M.S. in Computational Finance from Carnegie Mellon University. Berlinda is a Chartered Financial Analyst.


You can see delayed quotes for the VIX Index and VIX futures at the VIX page, and at the CFE page at

Below is a screenshot with a table with delayed quotes taken on Saturday, February 28. In the table the VIX Index is 13.34, the VIX March futures are priced at 15.81, and the VIX is in contango and the term structure is upward sloping as the longer-dated VIX futures are priced even higher.  Please note that the VIX Index is calculated and updated during regular trading hours, while the VIX futures are traded almost 24 hours per day2015-03-04-1232-Table-Berlinda


Below is a term structure chart at the end of February from the popular CBOE Term Structure Data page at  which illustrates, by maturity, expectations of market volatility conveyed by S&P 500 (SPX) stock index option prices. CBOE calculates these expectations by applying the VIX methodology to standard SPX option maturities.2015-03-04-1232-Term Structure-Berlinda