The chart below graphically represents the calculation for the Cboe’s VIX® with near-real-time (20-minute delayed) data, The actual VIX is located on the black dotted line in the left-center of the graph. Click here for a larger snapshot for 12-Nov-2014. The VIX now uses interpolation between two VIX style calculations (VIN and VIF) on SPX options series that are a week apart—bracketing the 30-day target horizon …
The movements of the CBOE’s VIX® are often confusing. It usually moves the opposite direction of the S&P 500 but not always. On Fridays the VIX tends to sag and on Mondays it often climbs because S&P 500 (SPX) option traders are adjusting prices to mitigate value distortions caused by the weekend. In addition to these market driven eccentricities the actual calculation of the VIX has …
White Papers “Volatility: A New Return Driver?” A good non-mathematical overview of volatility, volatility products including futures and a couple example trading strategies using volatility Exchange Traded Products “The VIX-VIX Futures Puzzle?” A technical paper testing the forecast accuracy of VIX futures that includes a comprehensive technical overview of the VIX, VIX Futures, and volatility term structures. It skips the calculus but provides a …
While doing simulations on volatility and the square root of time, I started thinking about how options experience time—is it calendar time, market time, or something in-between? The CBOE’s VIX® calculations use calendar time, a 365 day year, but most option gurus recommend using a 252 day year for volatility calculations—the typical number of trading days per year in the USA markets. When it comes to …
Previously I’ve done simulations, based on VIX futures, of volatility Exchange Traded Products (ETPs) back to 2004. In these simulations, I only generated the closing values, but since then I’ve had requests for open/high/low (OHL) values. I’ve extended my backtests to generate ETP opening and intraday highs and lows for many of the short and medium-term volatility funds—specifically VXX, VIXY, TVIX, UVXY (1.5X & 2X), …
