Nov 19, 2010

VIX Forecast

VIX settled Wednesday morning at 22.21, up 0.80 from last expiration, but it was a wild ride! My biggest bet for the past expiration was for VIX to finish below 20, which was working out fine for me right before last Friday. I finally got my code in place and ran expiration plots for december: the expected value for the VIX 20.57 with volatility (in $, not %) of 5.26. Also, I included probabilities of VIX expiring at a particular range. For the trading purposes it seems that the market is ambivalent between low-volatility regime and middle-volatility regime, and honestly I don't have a good gameplan yet. Good luck, traders, and hedge your deltas!

22-DEC-2010 probability of VIX from 10 to 15 is 4%
22-DEC-2010 probability of VIX from 15 to 20 is 54%
22-DEC-2010 probability of VIX from 20 to 25 is 30%
22-DEC-2010 probability of VIX from 25 to 30 is 7%
22-DEC-2010 probability of VIX from 30 to 35 is 3%
22-DEC-2010 probability of VIX from 35 to 40 is 1%
22-DEC-2010 probability of VIX from 40 to 45 is 1%
22-DEC-2010 probability of VIX from 45 to 50 is 1%
22-DEC-2010 probability of VIX from 50 to 55 is 0%
22-DEC-2010 probability of VIX from 55 to 60 is 0%
22-DEC-2010 probability of VIX from 60 to 65 is 0%
22-DEC-2010 probability of VIX from 65 to 70 is 0%
22-DEC-2010 probability of VIX from 70 to 75 is 0%

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