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VIX futures are often priced differently depending on the expiration date. VIX term structure is a plot of the futures values for different expiration dates.
When the near-term VIX futures contract is priced lower than later VIX futures, we say that the VIX futures curve is in contango. The opposite, backwardation, is when the near-term VIX futures is priced higher than a later VIX futures. Backwardation happens rarely (only about 20% of the time).
Historical VIX Contango-Backwardation Data:
This item downloads percent F1-F2, F4-F7 and F1 roll yield data and store it under the following ticker symbols:
^VIXF1F2: VIX futures Month 2 to Month 1 contango. The higher the value the more the VIX futures curve is in contango. This value is calculated by dividing the F2 VIX volatility by the F1 (Front Month) VIX volatility.
^VIXF4F7: Same as above but compare Month 7 to Month 4 VIX volatility.
^VIXF1RollYield: This is the Stop-F1 roll yield and it is calculated by dividing the front month VIX volatility by the VIX spot price
Historical data spans from October 2008 to present and can be used as trading signals to trade VIX futures or volatility ETFs (VXX, ZIV, TVIX...)
Example of a trading system that trades ZIV ETF:
a = getseries("^VIXF1F2", close);
buy = a > 0;
sell = a <= 0;
// Enter long ZIV when the VIX term structure is in contango
// Exit ZIV when the VIX term structure is in backwardation
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
