The Evolving Dynamics of VIX Futures was one of the most anticipated presentations today at RMC Europe and Alex Orus from Principalium Capital and Erkki Slide from Independent View met all expectations.
Slide noted the current low volatility environment and attributed a combination of the current equity market environment, low individual stock specific volatility, low correlations among S&P 500 constituents, and the trade-off between variance risk premium and tail risk as being factors contributing to low VIX. Despite the low levels for VIX he noted that SPX options are displaying pronounced skew and VIX option pricing remains elevated.
Orus noted that he finds opportunities across the spectrum of the VIX term structure. His strategy involves trading different futures expirations against each other when he perceives a relative pricing opportunity. He also noted that the environment for VIX futures has become more technical due to the increased influence of VIX related exchange traded products.