The VIX ETP daily roll has undergone significant changes in recent years, particularly since February 2018. According to a recent report by BofA, the relationship between the VIX ETP daily roll and the steepness of the VIX futures curve has experienced fluctuations. While this connection was once closely linked, it appears to have broken around the time of the report’s publication and has since reasserted itself amid recent ETP inflows.

To better understand these changes, let’s take a closer look at the history of the VIX ETP daily roll. The VIX ETP is an exchange-traded product that tracks the CBOE Volatility Index (VIX), which measures the expected volatility of the S&P 500 index over the next 30 days. The daily roll of the VIX ETP refers to the process by which the fund rebalances its holdings to reflect changes in the underlying index.

Prior to February 2018, the relationship between the VIX ETP daily roll and the steepness of the VIX futures curve was relatively stable. As the VIX futures curve became steeper, the VIX ETP daily roll tended to increase, reflecting a higher demand for volatility protection. However, around February 2018, this relationship began to break down, and the two variables began to move independently of each other.

One possible explanation for this change is the increasing popularity of ETPs among investors. As more investors turned to these products as a means of hedging against market volatility, the demand for VIX futures and ETPs increased, leading to a steeper curve. However, the daily roll of the VIX ETP did not necessarily reflect this increased demand, resulting in a disconnect between the two variables.

In recent months, however, the relationship between the VIX ETP daily roll and the steepness of the VIX futures curve has reasserted itself. As ETP inflows have increased, the demand for volatility protection has also risen, leading to a steeper VIX futures curve and a higher daily roll for the VIX ETP.

This evolution of the VIX ETP daily roll highlights the dynamic nature of the volatility landscape and the importance of staying informed about changes in market conditions. As investors continue to seek protection against potential market turmoil, the demand for volatility products is likely to remain high, potentially leading to further fluctuations in the relationship between the VIX ETP daily roll and the steepness of the VIX futures curve.

The evolution of the VIX ETP daily roll highlights the complex interplay between market conditions and investor demand for volatility protection. As this dynamic landscape continues to evolve, it is crucial for investors to stay informed about changes in the volatility landscape and the impact on their investment strategies.