Last Updated on 5 November 2023 by automiamo.com
Implied volatility is the market’s forecast of a likely movement in a security’s price. It is often used to price options contracts where high implied volatility results in options with higher premiums and vice versa. The most important indexes in stock market are VIX for S&P500 and VXN for Nasdaq.
- The MOVE Index, often referred to as the “VIX for Bonds.”, measures Treasury rate volatility through options pricing.
- 80-120 is the range of MOVE Index
- Pay attention to MOVE/VIX ratio. Higher values, stocks more favorite. Lower values, bonds more favorite
- Bonds anticipate stocks and volatility isn’t exeption
- A Higher MOVE Equals Costlier Mortgages, A More Strained Consumer
- Low/high volatilities better long/short opportunities
- VVIX is the VIX Volatility Index
- Pay attention to VVIX/VIX ratio. VVIX/VIX rapidly falling, market higher nervous
- The SKEW Index measures perceived tail-risk in the S&P500 over a 30-day horizon. It has been a poor indicator of stock market volatility, failing to accurately predict black swan events.
- VIX is based upon implied volatility round the at-the-money (ATM) strike price while the SKEW considers implied volatility of out-of-the-money (OTM) strikes.
- SKEW Index higher indicates that a Black Swan event is becoming more likely but not that it will actually occur
- 100-150 is the normal range
Historical average and standard deviation
On my automated Telegram channel I monito the daily rate of change compared to the historical average of the absolute deviations of data points from their mean (AVEDEV excel function) and the historical standard deviation (STDEV excel function).
STD is also a common tool that allows you to determine a data set’s variability, but AVEDEV uses absolute values, so you don’t need to perform additional steps and it is my preferred choice.
My attention is when daily rate of change beats AVEDEV.
Here the AVEDEV and STDEV historical values as reference:
- VIX Historical AVEDEV 4.8%, STD 7%
- VXN Historical AVEDEV 4.3%, STD 6.1%
- MOVE Historical AVEDEV 3.1%, STD 4.6%
- MOVE/VIX Historical AVEDEV 5.4%, STD 7.4%
- VVIX/VIX Historical AVEDEV 3.6%, STD 5.4%
- Bitcoin DVOL Historical AVEDEV 3.6%, STD 5.3%
- GVX (GOld) Historical AVEDEV 3%, STD 4.5%
- EVZ (Euro currency) Historical AVEDEV 3%, STD 5.2%