VIX Can Be Deceiving as Steep Curve Shows Uncertainty: Analysis
The slope matters more than the level
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Don’t let the low U.S. equity volatility fool you. The increasingly steep term structure of Chicago Board Options Exchange Volatility Index, or VIX, futures shows uncertainty remains high amid weak global growth and rising concerns about effectiveness of central bank policies, Bloomberg strategist Tanvir Sandhu writes.
The VIX futures curve’s typical contango, where the term structure is upward sloping, means roll-down costs will erode any returns from outright long positions or even cause losses.