Backwardation
A futures curve where near-dated contracts price above longer-dated ones. VIX backwardation appears in stressed markets, when immediate volatility is bid above expectations for the future.
Backwardation says the market wants protection now and expects calm later — the curve prices volatility mean-reverting downward. Episodes are infrequent but historically significant: they cluster around genuine market stress.
For volatility sellers, backwardation flips the usual carry: rolling short positions now costs rather than pays, one reason disciplined programs reduce or reverse exposure in these regimes instead of doubling down.
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