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I thought you’d enjoy reading this working paper on applying the VIX term structure to timing the S&P. Their concept of buying SPY puts and VIX puts at the same time, in certain conditions, is logical. I would expect that as they complete their study they’ll support it with more data for that strategy.
Overall their findings are consistent with our own findings as to the times the VIX is a good predictor of future movement in SPY.
Beginning next week the Connors Research Traders Journal will begin a multi-part series on trading volatility, especially VIX and VXX.
I hope you enjoy and learn from this study.
“VIX Futures as a Market Timing Indicator”
Larry Connors
Connors Research LLC
