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
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