Computing the leverage of CVOL compared to the VIX index
Any strategy that hopes to offset down days in the market with volatility products that go up on those same days needs to figure out how much leverage the volatility product provides. A little calculation produced the equation below for computing the expected price of Citigroup’s CVOL from the VIX index quote: (VIX – 10) * 9.6 = CVOL So if the VIX jumps …
