Volatility Carry Trade
Volatility Carry Trade — Selling implied vol or rolling VIX futures in contango — crowded but regime-sensitive.
Definition
Volatility Carry Trade refers to selling implied vol or rolling VIX futures in contango — crowded but regime-sensitive. Keep that definition fixed when comparing series, managers, or regimes — renaming the same tape does not create a new signal.
Why it matters
Options and futures embed views on vol, skew, and path that cash markets only hint at. When selling implied vol or rolling VIX futures in contango — crowded but regime-sensitive shifts, related hedges, limits, and narratives usually need an explicit update rather than a quiet assumption.
Case
Suppose a desk is positioned for the opposite of what volatility carry trade is saying. If selling implied vol or rolling VIX futures in contango — crowded but regime-sensitive moves against that book, the first question is not “is the story clever?” but whether size, hedges, and stop logic still match the observation.
How to read it
State the expiry and Greek exposure; unmarked vol or pinning effects rewrite the thesis. Prefer a short written null hypothesis for Volatility Carry Trade: what would falsify the current reading in the next window?