Introducing Mini VIX™ Futures Characteristics, Market Conditions, Strategies for Capital Protection
- historical volatility.
- future volatility. Derive from the price of individual options using a theoretical pricing model. It is unknown and base on prediction.
- Forward-looking.
VIX index potentially provides a glimpse into the market expectations for the future and as such it could be considered as a useful forecast.
there is a 4% up/down change in the next one month
mean reverting typically emerges with forward-looking indicators.
Measurement of market risk and investor sentiment.
using options prices rather than stock prices.
Expressed as an annualized one standard deviation of the market’s estimation of the changes in the price of the spx during the next three days.
In normally distributed data, one standard deviation should encompass about 68% of the time.
volatility and the VIX index are directionally agnostic(i.e. unsure) it is simply a statistical measure of how much market participants expect the index may move over a future time frame
Timeframe = 12 months
e.g VIX of 30 will be volatility= 0.30/3.464
The vix index can help participants potentially to read the trends in the market for example how current levels of volatility compared to historically high/low/average levels. This is valuable info if you are concern with a shift in trends or if you are determining a hedging strategy for your portfolio.
1 point=US$100
futures that are near expiration typically move with a much greater sensitivity to the Vix index than those with significantly more time until expiration.
A higher VIX index level suggests greater uncertainty in the market. A lower VIX index level suggests lower uncertainty in the market.
