Trading VIX Derivatives


  • Format: PDF
  • Pages: 286
  • Published Date: 2011


Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange-Traded Notes

Trading VIX Derivatives will show you how to use the Chicago Board Options Exchange’s S&P 500 volatility index to gauge fear and greed in the market, use market volatility to your advantage, and hedge stock portfolios. Engaging and informative, this book skillfully explains the mechanics and strategies associated with trading VIX options, futures, exchange traded notes, and options on exchange traded notes.


Futures and then option contracts were developed by the CBOE to al-low investors the ability to capitalize on an outlook for market volatility. These contracts witnessed steady growth until the second half of 2008, when, with an explosion in implied volatility, the marketplace realized the benefits of volatility as a diversification tool. Other exchanges have taken notice of the success of VIX futures and options and have developed their own volatility indexes and derivative products. Volatility indexes and derivatives on gold, oil, currencies, and even soybeans are now calculated and traded by a variety of exchanges.

This book is divided into two sections. The first half of the book is a description and overview of the variety of volatility-related indexes and products currently available. The unique features of many of the derivative contracts are based on implied volatility, and these are touched on throughout the first section. Some of the confusion that novice traders encounter when considering trading VIX products is addressed, along with instructions on how to interpret a variety of indexes.

The second half of this book is devoted to the uses of volatility-related indexes and products. Methods for speculating on the direction of the overall market or just volatility are addressed. Using volatility derivatives as a tool for hedging traditional portfolios is discussed. Also, the emergence of volatility indexes and trading products as forecasting tools is discussed.

Volatility as an asset class and trading tool is a rapidly growing area in the markets. While writing this book, dozens of new indexes and derivative products based on implied volatility were introduced. Trying to keep up with all of them is nearly impossible, and if I’d tried, this book may never have made it to your hands.


  • Understanding Implied Volatility
  • About the VIX Index
  • VIX Futures
  • VIX Options
  • Weekly Options on CBOE Volatility Index Futures
  • Volatility-Related Exchange-Traded Notes
  • Alternate Equity Volatility and Strategy Indexes
  • Volatility Indexes on Alternative Assets
  • The VIX as a Stock Market Indicator
  • Hedging with VIX Derivatives
  • Speculating with VIX Derivatives
  • Calendar Spreads with VIX Futures
  • Calendar Spreads with VIX Options
  • Calendar Spreads with VIX Options and Futures
  • Vertical Spreads with VIX Options
  • Iron Condors and Butterflies with VIX Options