If you’ve ever seen a VIX term structure chart and weren’t sure what it meant, you’re not alone! This post will break it down in simple terms, explaining what it represents, why it matters, and how to interpret it.

What Is a VIX Term Structure Chart?

A VIX term structure chart shows how the market is pricing expected volatility over different time periods in the future. It displays the closing prices of VIX futures contracts for the last trading day, covering the next 1 to 9 months. For example, the black highlighted line in the chart above represents the closing prices of VIX futures contracts on March 7, 2025.

The VIX, often called the “fear gauge,” measures market expectations of volatility in the S&P 500 over the next 30 days. But what about beyond 30 days? That’s where VIX futures come in—they provide a way to see how the market expects volatility to evolve months into the future.

Breaking It Down: What Do 1 to 9 Month Futures Represent?

Each point on the VIX term structure chart represents the closing price of a VIX futures contract that expires at a specific time in the future.

📌 Example:

• The 1-month VIX future refers to the next expiration, which happens on the closest next third Wednesday of the month.
• The 2-month VIX future expires on the third Wednesday two months from now, and so on.
• The 9-month VIX future expires on the third Wednesday of the ninth month from today.

So if today is March 7th, then:

• The 1-month VIX future expires on March’s third Wednesday
• The 2-month VIX future expires on April’s third Wednesday
• The 9-month VIX future expires in November’s third Wednesday

This means the chart is giving you a snapshot of how traders expect market volatility to evolve over the coming months.

What Does the VIX Term Structure Tell Us?

The VIX term structure is one of the ways the market prices future risks based on investor expectations.

1️⃣ Upward Sloping (Contango) – A rising curve suggests the market expects higher volatility in the future than in the short term, which is typical as uncertainty increases over time.

2️⃣ Downward Sloping (Backwardation) – A falling curve indicates traders expect high volatility now but believe it will decline over time. This often occurs during market stress, such as financial crises.

3️⃣ Unusual Spikes or Dips – A sudden jump or drop at a specific month may signal expectations of major events, like elections, Federal Reserve decisions, or economic shocks.

Why Should You Care About the VIX Term Structure?

Even if you don’t trade, the VIX term structure provides insight into market sentiment:
✅ Smooth, upward-sloping curves → Normal risk expectations.
🚨 Steep downward slopes → Signs of market stress and uncertainty.
⚠️ Sharp spikes in certain months → Traders hedging against specific risks.

Final Thoughts

The VIX term structure doesn’t predict the future, but it reflects how investors price volatility risks, making it a valuable market indicator.

At IVAnalog.com, our VIX term structure plots go beyond today’s data—we also show historical analogs where past VIX curves resembled the current one. By comparing today’s structure with similar historical patterns, we aim to uncover insights into potential market behavior.

Next time you look at a VIX term structure chart, you’ll not only understand it—you’ll also see what history might be telling us. Contact us at [email protected] if you have more questions!