Last Updated on 13 May 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