# Term Structure Trading > Term structure trading bets on the slope of implied volatility across expiries. Learn calendar trades, VIX futures roll yield, event plays and their risks. Source: https://learn.tradelabsai.com/volatility/term-structure-trading/ Track: Volatility · Level: Advanced · Updated: 2026-10-03 Publisher: TradeLabs AI (https://tradelabsai.com). Education, not financial advice. Cite as: TradeLabs Learn, "Term Structure Trading", https://learn.tradelabsai.com/volatility/term-structure-trading/ Term structure trading focuses on the relationship between implied volatilities at different expiries. Rather than betting that volatility will rise or fall overall, a term structure trader bets that short dated volatility will move relative to long dated volatility: that an inverted curve will normalise, that a steep curve will flatten, or that an event is mispriced in one expiry. The main tools are options calendar spreads and VIX futures spreads. ## Shapes and opportunities | Curve shape | Typical situation | Possible trade | |---|---|---| | Steep contango | Calm markets | Sell longer dated volatility against short dated, or harvest roll yield in VIX futures | | Inverted (backwardation) | Stress | Sell short dated volatility, buy longer dated, betting on normalisation | | Event hump | Earnings, central bank meetings | Sell the event expiry, buy the expiry after | | Flat | Transition | Wait or trade other features | See [Volatility Term Structure](https://learn.tradelabsai.com/volatility/volatility-term-structure/). ## Options calendar trades A long calendar sells a near expiry and buys a far expiry at the same strike. It profits from: - **The front volatility falling relative to the back,** such as after an event. - **Time decay** in the front option, if the underlying stays near the strike. A reverse calendar (buy front, sell back) profits if front volatility jumps relative to back, for example if a crisis hits. See [Calendar Spreads](https://learn.tradelabsai.com/options/calendar-spreads/). ### Vega weighting Short dated implied volatility moves more than long dated. A calendar that is vega neutral in raw terms can still behave like a long or short volatility trade. Traders often weight vega by √(reference time / time to expiry) to compare exposures. See [Vega](https://learn.tradelabsai.com/options/vega/). ## VIX futures term structure trades VIX futures for different months form a curve. Common trades: - **Short front month VIX futures in contango:** profits as futures roll down towards a lower spot VIX. This is the core of short volatility products, and it can lose heavily in spikes. - **Calendar spreads in VIX futures:** for example, long the second month and short the first, which can benefit when the front of the curve jumps in a spike (though the opposite is more common in calm markets). - **Long VIX futures as a hedge:** expensive to hold in contango because of negative roll yield. See [Roll Yield](https://learn.tradelabsai.com/futures/roll-yield/) and [Contango](https://learn.tradelabsai.com/futures/contango/). **Example: Roll down in VIX futures** Spot VIX is 14. The front month VIX future, expiring in 30 days, trades at 16, and the second month at 17.5. If spot VIX stays at 14, the front future converges to about 14 at expiry: a short position gains 2 points ($2,000 per contract on the standard $1,000 multiplier). If instead VIX jumps to 30, the short loses 14 points, $14,000 per contract. Steady small gains with occasional large losses are the signature of short volatility roll trades. See [The VIX](https://learn.tradelabsai.com/volatility/the-vix/). ## Event term structure trades Scheduled events create a hump at the expiry that covers them. Traders can: - **Sell the event expiry and buy the next one** if they think the implied event move is too large. - **Buy the event expiry and sell the next one** if they think it is too small. The implied event move can be extracted from the difference in total variance between expiries before and after the event. See [Earnings Trading](https://learn.tradelabsai.com/strategies/earnings-trading/). ## Risks - **Volatility spikes:** short front volatility trades can lose very quickly. - **Moves away from the strike:** options calendars lose if the underlying moves far. - **Changing regimes:** curves can stay inverted or steep for longer than expected. - **Product structure:** exchange traded products tied to VIX futures can behave very differently from spot VIX, as February 2018 showed when several short volatility products collapsed in a day. ## Managing term structure positions 1. **Weight vega by expiry** and stress test spikes in the front. 2. **Limit size** in short front volatility trades. 3. **Use options to cap risk,** such as VIX calls as protection for short VIX futures. 4. **Track the VIX to VIX3M ratio** as a gauge of curve stress. ## Frequently asked questions ### What is volatility term structure trading? Trading the difference between implied volatilities at different expiries, betting on changes in the curve's slope or on mispriced events. ### What is roll yield in VIX futures? The gain or loss from futures converging toward spot over time. In contango, long VIX futures lose and short positions gain as futures roll down. ### Why are short VIX trades risky? Because VIX can spike suddenly, causing losses far larger than the steady gains collected in calm periods. Next, learn to trade index volatility against single stocks in [Dispersion and Correlation Trading](https://learn.tradelabsai.com/volatility/dispersion-trading/). ## Continue learning - Next lesson: [Dispersion and Correlation Trading](https://learn.tradelabsai.com/volatility/dispersion-trading/) - Previous lesson: [Skew Trading](https://learn.tradelabsai.com/volatility/skew-trading/) - Related: [Skew Trading](https://learn.tradelabsai.com/volatility/skew-trading/): Skew trading bets on changes in the implied volatility difference between strikes. Learn risk reversals, put spread structures, what drives skew and the risks. - Related: [Volatility Term Structure](https://learn.tradelabsai.com/volatility/volatility-term-structure/): The volatility term structure plots implied volatility across expiries. Learn what upward and inverted curves mean, how events show up and how traders use it. - Related: [Calendar Spreads](https://learn.tradelabsai.com/options/calendar-spreads/): A calendar spread sells a near term option and buys a longer term option at the same strike. Learn how it profits from time decay and volatility, with examples. - Related: [The VIX](https://learn.tradelabsai.com/volatility/the-vix/): The VIX measures expected 30 day volatility of the S&P 500 from option prices. Learn how it is calculated, what levels mean, VIX futures and how traders use it. - Related: [Roll Yield](https://learn.tradelabsai.com/futures/roll-yield/): Roll yield is the return from futures converging toward spot as they near expiry. Learn how contango and backwardation drive it and how to estimate it. - Related: [Contango](https://learn.tradelabsai.com/futures/contango/): Contango is when later futures trade above nearer ones or spot. Learn why it happens, how it erodes long commodity and VIX funds, and how traders use it.