Intraday Elasticity Between VIX Futures and Volatility ETPs

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VIX futures and Exchange-Traded Products (ETP) are widely used instruments for both volatility speculation and hedging, making a clear understanding of their behavior essential for these purposes. Several studies have examined the relationship between spot VIX, VIX futures, and volatility-linked ETPs.

Reference [1] contributes to this literature by analyzing the sensitivity of VIX ETPs to movements in VIX futures. Specifically, the authors investigate the intraday price dynamics of the SPVXSTR, along with three VIX ETNs (VXX, XIV, TVIX) and three ETFs (VIXY, SVXY, UVXY), all linked to that index. Rather than relying on standard OLS regression, the study employs quantile regression, which minimizes a weighted sum of absolute errors and allows for asymmetric penalties on over- and under-predictions.

The authors pointed out,

Decile regressions highlight the sensitivity of VIX Futures prices to ETP prices and how these changes in different volatility environments. Results show that VIX futures, as proxied by SPVXSTR, are more responsive to VXX, than to TVIX and XIV except 3:45–4:15p.m.where XIV is dominant. Results also show increasing sensitivity of SPVXSTR to XIV across the full day (panel A) in higher deciles, where higher returns on VIX futures may well drive higher hedging demands for such products such that hedging is brought-forward earlier in the day. Similarly, the results for the associated ETFs, which are less actively traded, are more ambiguous. Practically speaking, the higher elasticity during the trading day means that intraday trading conditions amplify the responsiveness of VIX futures to ETP price changes. Traders may seek to exploit these variations. Similarly, elasticity is heightened at the extreme ends of the distribution at close. VIX futures may overreact to ETP movements and this has implications for calibrating hedging strategies in stress scenarios.

In short, the results show that VIX futures (SPVXSTR) are generally more sensitive to VXX than to TVIX or XIV, with the exception of the late-afternoon window (3:45–4:15 p.m.). Intraday elasticity is elevated—especially near the close and in the tails—implying that VIX futures can overreact to ETP price changes, which creates potential trading opportunities and important considerations for hedging under stress.

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References

[1] Michael O’Neill, Gulasekaran Rajaguru, Elasticity dynamics between VIX futures and ETPs: a quantile regression analysis of intraday and closing market behavior, Journal of Accounting Literature (2025) 47 (5): 694–701.

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