Schaeffer's Trading Floor Blog

I Dream of VIX Trading

VIX futures will soon be tradable overnight

by 6/11/2014 7:44 AM
Stocks quoted in this article:

Ever wake up in the middle of the night and have the urge to trade CBOE Volatility Index (VIX) futures? Well, if it happens on a weekday, you're about to be in luck! This, from the Chicago Board Options Exchange (CBOE):

Beginning on Sunday, June 22, 2014 at 5:00 p.m. for the business day of Monday, June 23, 2014, CBOE Futures Exchange, LLC (CFE) is expanding trading hours in CBOE Volatility Index (VIX) futures to be nearly 24 hours a day, five days a week. Specifically, the trading week for VIX futures will begin on Sunday at 5:00 p.m. and end on Friday at 3:15 p.m. CFE will be closed for trading on Monday through Thursday for 15 minutes between 3:15 p.m. and 3:30 p.m. and trading for the new business day will begin at 3:30 p.m. on Monday through Thursday. CFE will close at 3:15 p.m. on Friday and will remain closed until 5:00 p.m. on Sunday, when the new trading week will begin.

I doubt this impacts actual prices all that much. If there's market-moving news in our overnight, you can now try to pick off some stale VIX futures order. So, here's some advice: Don't leave open orders out in VIX if you're not awake. In fact, that's good advice in any product. By morning and regular hours, VIX futures will be basically wherever they would have been anyway.

But who knows? Maybe off-hours traders will see the folly of always assuming VIX will rally six months out and help flatten out the term structure. I doubt it, though.

As we noted a month or so ago, VIX futures and options volume remains strong, but the volatility of VIX options -- proxied by VVIX -- remained weak. That was thanks to the larger (and smarter) money making bearish bets on VIX.

Well, they're still making those bets, but on a decelerating basis:

Large traders and speculators trimmed their bearish bets in the VIX futures market for a third consecutive week last week, according to the latest data from the Commodity Futures Trading Commission (CFTC) released on Friday.

The VIX non-commercial futures contracts, comprising of large speculator and hedge fund positions, totaled a net bearish position of -76,796 contracts in the data reported for June 3rd. This was a change of +4,983 contracts from the previous week's total of -81,779 net contracts that was registered on May 27th.

It's likely that is nothing more than seasonal, as volume in general has tapered … and will likely only get worse into July 4. But 11-ish VIX clearly makes it less appealing to bet against VIX. Then again, with VIX futures at premiums, you don't actually have to sell VIX at 11. Your bet wins so long as VIX doesn't rally too much between now and when the options expire.

Or you can always just buy the iPath S&P 500 VIX Short-Term Futures ETN (VXX) … OK, never mind.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.


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