This year we have seen increased interest in learning more about strategies that sell futures on the Cboe Volatility Index® (VIX®). Strategy benchmark indexes can shed light on how hypothetical strategies have performed in different past market environments. The Cboe Capped VIX Premium Strategy Index (VPN) is a strategy benchmark index that (1) sells VIX futures over a money market account, (2) buys VIX call options, and (3) has a price history that begins in June 2004. As shown in the first chart below, in the period from mid-2004 through May 31, 2008, the VPN Index had higher returns than three other benchmark indexes.


The VPN Index sells monthly VIX futures over a money market account. VIX futures are held until expiration and new VIX futures are then sold. The money market account decreases leverage relative to a stand-alone short position in VIX futures. In addition, the VPN Index limits the risk of the short VIX exposure with long VIX calls struck 25 points higher than the VIX futures price, or at the closest strike below when this strike is not listed. Since the multiplier of VIX options is 100, each VIX futures is covered by 10 VIX calls.


In recent years investor interest in strategies that sell VIX futures has increased, and one of the main factors driving this increase in interest has been that on about 75% of the trading days since January 2008, the VIX Index has been in contango (when the daily closing futures prices have been higher than the spot prices for the VIX Index). For investors who are rolling futures positions, contango often may be helpful to futures sellers but may create a drag on performance for buyers of futures.

The chart above shows a line with the 10-day rolling averages for the differences between the daily closing values of the near-term VIX futures and the spot VIX Index. While the VIX Index was in contango on the majority of days since 2008, on certain days in 2008, 2011, 2015, and 2018 the VIX Index was in backwardation (when the daily closing futures prices have been lower than the spot prices for the VIX Index). 


When assessing short volatility strategies, or any investment strategies, investors can do an analysis of drawdowns, the percentage falls from peak value to trough value for month-end values. Many investors have a great aversion to huge drawdowns in their portfolios. In the drawdowns chart below, the worst drawdown for the VPN Index (down 48.1%) was less severe than the worst drawdowns for the stock and commodity indexes.  The fact that the VPN Index is collateralized with a money market account and that it buys VIX In addition, the worst drawdown for the Cboe VIX Premium Strategy Index (VPD) was down 56.3% - this drawdown was 8.2 percentage points worse than the worst drawdown for the Cboe VPN Index. The difference between the methodologies for the VPN and VPD indexes is the fact that the VPN Index buys VIX calls, and the VIX calls helped the VPN Index avoid dropping as far as the VPD Index.


The table below presents an analysis with six metrics for five benchmark indexes since mid-2004.

  1. VPN and VPD both had higher annualized returns than the S&P 500, MSCI Emerging Markets, and S&P GSCI indexes.
  2. VPN had a higher standard deviation than the stock indexes and lower standard deviation than the S&P GSCI index.
  3. The positive Information Ratios for the VPN and VPD indexes were higher than the negative Information Ratios for the MSCI Emerging Markets and S&P GSCI indexes. The Information Ratio is a measure of the risk-adjusted return of a financial security (or asset or portfolio), and it is defined as expected active return divided by tracking error.
  4. The R-Squared vs. market value for VPN was 60.5%. R-squared is a measure of the percentage of an asset or fund's performance as a result of a benchmark’s performance.
  5. The worst drawdown for VPN was down 48.1% (better than the other four indexes).
  6. The length of the worst drawdown for VPN was six months, a shorter period than those for the stock and commodity indexes.


The Cboe Capped VIX Premium Strategy Index (VPN) is a strategy benchmark index that sells VIX futures over a money market account, and buys VIX call options. Since mid-2004, the VPN Index has had higher returns, higher information ratio, and less severe drawdowns than key stock and commodity indexes. 

To learn more about the VPN Index, visit, and to learn more about VIX futures and options, visit

The views expressed herein are those of the author and do not necessarily reflect the views of Cboe Global Markets, Inc. or any of its affiliates. Options involve risk and are not suitable for all investors.  Prior to buying or selling an option, a person must receive a copy of “Characteristics and Risks of Standardized Options.”  Copies are available from your broker or from The Options Clearing Corporation at One Wacker Drive, Suite 500, Chicago, IL 60606 or at Futures trading is not suitable for all investors, and involves the risk of loss.  The risk of loss in futures can be substantial.  You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.  For additional information regarding futures trading risks, see the Risk Disclosure Statement set forth in CFTC Regulation §1.55(b). Past Performance is not indicative of future results.