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Contribution Details
| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Investigating Rate of Return on VIX Options |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 47 |
| Date | 2021 |
| Abstract Text | In this paper we investigate the returns of VIX options. We investigate how the distribution of VIX option returns look like with respect to the options moneyness i.e the risk neutral probability that the option expire ITM. Sec- ondly we look at how the returns behave with respect to time by shorting the options and holding the positions until expiration. In the case of moneyness we find that there has been enough tail events over the lifetime of VIX options that even deep OTM calls produce returns not different from unity. Put option returns exhibit slight favourite-longshot bias. When it comes to where the returns from shorting VIX options are concentrated short dated call options perform the best. We find that shorting front-month call options one day before expiration results in an annual return of 9.87% and a Sharpe ratio of 3.95. |
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