Apr 24, 2011

VIX Expiration, Week in Volatility

Last VIX expiration we were in the middle of quite frightful economic situation in the aftereffect of Japanese tsunami/earthquake and Libya, with VRO at 25.14. Now month later the market perception has sharply reversed with VIX again trading new multi-year lows. VIX settled at 14.86 on April expiration, down more than 10 points, while VSTOXX fell from 35.23 to 19.08 (closing values on Mar 16 and Apr 20). The forecasts that I made where quite off - just like I could not anticipate the rise in volatility, I really could not anticipate the fall. In my own trading I experience a very uncomfortable drawdown that I subsequently recovered from, and took opportunity to buy a lot of options during last week's decline in the VIX.

My forecasts for the next expiration are
VIX at 16.51 vs 17.90 in the futures, and
VSTOXX at 20.60 vs 21.30 in the futures

GVZ futures traded 42 contracts last week, and options volume grew as well, but for some technical reasons I cannot get the total options number. EDIT: 146 options contracts.

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