Interpreting the VIX Term Structure: What the Market is Saying About Volatility and the 2024 Election

The recent VIX term structure chart reveals intriguing insights into market sentiment around volatility heading into the 2024 U.S. election.

Currently, we observe an initial drop in volatility expectations for December, followed by a steady rise through mid-2025. This structure suggests that while traders anticipate relatively calm conditions immediately surrounding the election, they expect volatility to pick up afterward.

The initial dip could reflect holiday seasonality and a sense of short-term confidence, as December often sees reduced market activity. But from early 2025 onward, we see a pronounced upward slope in the VIX futures term structure, indicating market anticipation of potential instability or policy changes post-election. This upward trend suggests that investors are already preparing for economic, regulatory, or geopolitical shifts that could impact financial markets in the months following the election.

For traders and investors, the term structure provides a window into how the market is hedging against future uncertainty. It signals a tactical opportunity for those looking to capitalize on volatility trends, especially in sectors sensitive to policy changes. As we approach the election, monitoring changes in the VIX term structure can offer additional insights into how market sentiment evolves in response to political developments.

You can probably see how understanding the VIX futures curve, especially during periods of political uncertainty, as a tool for managing risk and anticipating potential market shifts.