Been observing the VIX futures curve and noticed some patterns when markets get stressed.
It seems to flatten or invert during volatility. Last month, the front month contracts were higher than the back months.
Is anyone else looking at this? I’m curious about finding better entry points when the curve behaves this way.
Got similar signals on my charts around that time frame too. Usually go short when spread hits above 2.5 points historically.
The behavior of the curve does indicate market sentiment. An inverted curve usually suggests traders anticipate a drop in volatility soon.
Periods of backwardation can present solid contrarian opportunities if timed wisely. However, steep contango can complicate trades as VIX products tend to decay quickly.
Keeping an eye on the term structure has helped in avoiding rough trades, especially around earnings.
Curve inversion indicates high fear levels. Front month premium over back months offers unique trade setups.
• Monitor M1/M2 spread
• Track roll yield patterns
• Observe mean reversion signals
Backwardation typically lasts 2-3 weeks historically.
VIX backwardation burned me hard two years ago when I held positions too long expecting quick mean reversion.
Now I watch the M1-M2 spread closely and exit when it starts normalizing. Made decent profits last month catching that exact setup you mentioned.
Timing is everything with these curve trades.