Price & Market BehaviorExtended setlive in productionNew

implied volatility term structure slope

Updated dailyData needs: highlong onlyshort onlylong short

2017

Vasquez, A. (2017). Equity Volatility Term Structures and the Cross Section of Option Returns. Journal of Financial and Quantitative Analysis, 52(6), 2727-2754.

Citation only, paper link pending.

In plain terms

When longer-dated options are calmer than near-dated ones the market is relaxed and the stock can trend up, but when near-dated options are jumpier it signals near-term stress.

How it works

The slope of a single name's implied-vol term structure (long minus short maturity ATM IV) carries information driven by idiosyncratic IV mean reversion. A steep upward slope (contango) marks a calm forward regime supportive of trend longs, while an inverted slope (backwardation) marks near-term stress.

Live results

24 times picked on its own · 53 times inside a blend (53 beat the stock) · updated 2026-06-06

This strategy is a frequent ingredient in blends that combine a few strategies on one stock. It has contributed to 53 such blended picks (53 of which beat simply holding the stock). Picking it on its own is only one of the ways it shows up.

How its picks scored vs. buy & hold

Each pick is graded on a recent year it was never tuned on, against simply owning the same stock

Where its edge concentrates

Share of picks in each company-size group that beat buy & hold

How often it trades

Active vs. patient. Bars on the left mean it waits for rare setups; bars on the right mean it trades often

Return vs. buy & hold

How much each pick beat or trailed simply owning the stock over the test year (extreme microcap moves trimmed)

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Data dependencies

Options surface daily
End-of-day OPRA option chains used by IV-skew family.
Daily prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.

Expected edge

Uses the shape of the volatility term structure as a forward regime gauge to time trend-following longs vs stress shorts.

Related families

implied volatility rank mean reversionPrice & Market Behavior

When fear in the options market is at a one-year high the stock tends to bounce back, and when it is unusually calm the stock tends to slip.

risk-neutral skew term structure spreadPrice & Market Behavior

When near-term options suddenly price in much more crash risk than longer-dated ones, the stock tends to fall as the market catches up.

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