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An analysis on the intraday trading activity of VIX derivatives

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  • Dian‐Xuan Kao
  • Wei‐Che Tsai
  • Yaw‐Huei Wang
  • Kuang‐Chieh Yen

Abstract

We investigate the relation between trading activity in the VIX derivative markets and changes in the VIX index under a high‐frequency framework. We find a significant relation between the signed trading variables of VIX futures and the contemporaneous changes in the VIX index. In addition, the net signed trading variables of VIX futures are significant predictors of future changes in the VIX index. Our results provide support for the informational role of VIX futures and evidence that trading activity in VIX options is likely caused by temporary liquidity shocks rather than the likelihood of informed trading.

Suggested Citation

  • Dian‐Xuan Kao & Wei‐Che Tsai & Yaw‐Huei Wang & Kuang‐Chieh Yen, 2018. "An analysis on the intraday trading activity of VIX derivatives," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(2), pages 158-174, February.
    • Handle: RePEc:wly:jfutmk:v:38:y:2018:i:2:p:158-174
    DOI: 10.1002/fut.21857
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    Cited by:

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    2. Yi‐Wei Chuang & Wei‐Che Tsai & Ming‐Hung Wu, 2020. "The impact of net buying pressure on VIX option prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(2), pages 209-227, February.
    3. Kaeck, Andreas & van Kervel, Vincent & Seeger, Norman J., 2022. "Price impact versus bid–ask spreads in the index option market," Journal of Financial Markets, Elsevier, vol. 59(PA).

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