Vix range changes

[mr_cassandra]

If you chart out the vix from the early 90's thru today you can see it used to be down in the low 10's, then up to the 50's and the past few years back to the tens.

I don't think the canned explanation totally accounts for this when it says vix is anticipated volatility.

Just as prevailing interest rates, hence cost of money, affects option premiums, I thin some outside factor is involved with these large vix range changes.

Any constructive opinions welcome.

 

[Rhody Trader]

The VIX measures 30-day implied volatility, as such it doesn't account for interest rates. Implied vol, of course, is a measure of trader's expectations of future volatility. If you were to look at a normalized version of the ATR indicator for the S&P 500 during the same timeframe you will see that it matches pretty closely the ups and downs of the VIX. ATR is a measure of historical volatility, of course, but folks clearly have a tendency to expect the volatility they've seen recently to continue into the near future.

What's worth noting is that in 2003 the VIX was reformulated. Originally it just included S&P 100 index options. Now it covers the S&P 500 index.

 

[mr_cassandra]

thanks

I may be able to work with atr to perspectivize vix. The 200 day lookbacks I use in my program are good but I feel I can do better.

The VIX measures 30-day implied volatility, as such it doesn't account for interest rates. Implied vol, of course, is a measure of trader's expectations of future volatility. If you were to look at a normalized version of the ATR indicator for the S&P 500 during the same timeframe you will see that it matches pretty closely the ups and downs of the VIX. ATR is a measure of historical volatility, of course, but folks clearly have a tendency to expect the volatility they've seen recently to continue into the near future.

What's worth noting is that in 2003 the VIX was reformulated. Originally it just included S&P 100 index options. Now it covers the S&P 500 index.

 

[Rhody Trader]

I may be able to work with atr to perspectivize vix. The 200 day lookbacks I use in my program are good but I feel I can do better.

The N-ATR I referred to in my post is a 14-period version applied to the monthly chart.

 

[mr_cassandra]

atr

I wish there was a way to calculate an atr not in points but in percent of current price.

By that I mean a 6 point move off 100 is much more volatile than a 6 point moved off 300.

I think if theres a way to normalize it into a number comparable in all years, it could be used to adjust vix into a range same for all years.

The VIX measures 30-day implied volatility, as such it doesn't account for interest rates. Implied vol, of course, is a measure of trader's expectations of future volatility. If you were to look at a normalized version of the ATR indicator for the S&P 500 during the same timeframe you will see that it matches pretty closely the ups and downs of the VIX. ATR is a measure of historical volatility, of course, but folks clearly have a tendency to expect the volatility they've seen recently to continue into the near future.

What's worth noting is that in 2003 the VIX was reformulated. Originally it just included S&P 100 index options. Now it covers the S&P 500 index.

 

[Rhody Trader]

I wish there was a way to calculate an atr not in points but in percent of current price.

There is. I've written about it on a few occassions. Google it and you'll find examples. I think it was 2006 that I had something in TASC about it.

 

[mr_cassandra]

found it

right after I posted coincidentally I did that and found a few great ideas. Now all I have to do is use it to factor vix.

There is. I've written about it on a few occassions. Google it and you'll find examples. I think it was 2006 that I had something in TASC about it.