Volatility is a significant force in financial markets. The CBOE Volatility Index (VIX) is the most well- known measure of market sentiment. The introduction of VIX futures in 2004 enabled market participants to express their estimates of market volatility at various expiration dates.1 This allowed the development of a term structure curve for volatility. In this article, I introduce the topic of the volatility term structure and analyze how it can be used.

Despite the headwinds expected in 2023, this year has been great for the stock market, with the S&P 500 posting a year-to-date return of 14.28%.1 Still, there were a number of events that could have derailed the stock market this year, from the U.S. regional banking crisis in March to the debt ceiling dispute that was settled in June. Despite all this, there was no significant increase in volatility as the VIX index did not rise above 27.