Cash VIX Term Structure

10 thg 1, 2023

Let’s first start with some definitions:
VIX9D: The CBOE S&P 500 9-Day Volatility Index estimates the expected 9-day volatility of S&P 500® stock returns.
https://www.cboe.com/us/indices/dashboard/vix9d/

VIX: The CBOE Volatility Index® (VIX® ) is considered by many to be the world's premier barometer of equity market volatility. The VIX Index is based on real-time prices of options on the S&P 500® Index (SPX) and is designed to reflect investors' consensus view of future (30-day) expected stock market volatility. The VIX Index is often referred to as the market's "fear gauge".
[url=cboe.com/us/indices/dashboard/vix/ ]cboe.com/us/indices/dashboard/vix/

VIX3M: The CBOE 3-Month Volatility Index is designed to be a constant measure of 3-month implied volatility of the S&P 500® (SPX) Index options.
[url=cboe.com/us/indices/dashboard/vix3M/ ]cboe.com/us/indices/dashboard/vix3M/

VIX6M: The CBOE S&P 500 6-Month Volatility Index is an estimate of the expected 6-month volatility of the S&P 500® Index.
[url=cboe.com/us/indices/dashboard/vix6M/ ]cboe.com/us/indices/dashboard/vix6M/

VIX1Y: The CBOE S&P 500 1-Year Volatility Index is an estimate of the expected 1-Yeaer volatility of the S&P 500® Index.
[url=cboe.com/us/indices/dashboard/vix1y/ ]cboe.com/us/indices/dashboard/vix1y/

This indicator visually displays the relationship between all the above products (short term vol vs long term vol). It also displays the current value and daily percentage change.

The shape of the term structure can tell us a lot about the market:
When the slope of the term structure is upward sloping (longer term VIX are higher than shorter term VIX), we say the term structure is in contango. This usually means that market is stable.
When the slope of the term structure is downward sloping (longer term VIX are lower than shorter term VIX), we say the term structure is in backwardation. This usually happens in periods of extreme market volatility.

Sometimes VIX9D will be higher than VIX but the rest of the curve is in contango. This means that there might be some event in the next 9 days that we need to pay attention to.

I also added a few ratios that I personally track like VIX9D/VIX, VIX/VIX3M and VIX/VIX6M.
When trading short term, I tend to focus on the front end of the curve. When trading long term, I tend to look at VIX/VIX6M.

In addition to the ratios, I added some historical parameters (lookback date can be set from the indicator’s settings) like Highest Value, Lowest Value, Percentile Rank, Average, Median and Mode.
Percentile ranks are displayed for both individual products and their ratios (that’s how I like to see them).

I hope you guys like this indicator.

Happy trading!