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Market Measures

Monday – Friday | 9:00 – 9:20a CT

Nine Day Vol Term Structure

Market Measures

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized Options before deciding to invest in options.

Option traders are always keeping an eye on implied volatility whether it’s the VIX, VIX9D, VIX3M, or VIX6M because those values have a direct impact on option prices. But is there any advantage to selling premium when the 9-day implied volatility is higher than the 30-day implied volatility?

The Study:
  • SPY
  • 45 DTE
  • 20 Delta Strangles Held to Expiration
  • 2011 – Present
  • Compared:
    • Selling in all Scenarios
    • Selling when VIX9D > VIX

When it comes to average trade performance, waiting to enter based on short term backwardation does not materially improve performance. This is because volatility isn’t always high when the term structure goes into backwardation. For example, there were several occurrences in 2017 when the term structure went inverted with the VIX below 15.

Rather than monitor term structure to determine trade entry we can stick with IV Rank to determine whether options are expensive or cheap.

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