Aug 14, 2011

Week in Volatility

This week saw a lot of market action, but not much directional movement. Volatility indexes and futures rose. There is a huge spike in in implied volatility of VSTOXX options, but given that they have only 3 trading days until expiration it does not mean much. Implied volatility of VIX options was almost unchanged since last week. I think the next week we will see more of the same with a lot of volatility going into options expiration.

Particularly striking was the move in RTSVX, which closed on Tuesday at 71.64 finishing the week at 53.63, up over 20 points since the week before. Increased volatility in the market boosted trading volumes in RTSVX contracts to new record levels.

At the same time CBOE SKEW index - measure of market-implied assymetry did not change much. As I mentioned before which VIX measures total volatility of the market, it is possible to separate upside and downside volatility. According to my calculations market expectation of upside volatility for the next 30 days is 28.23%, and downside volatility 43.57% (both are annualized) . For weekly horizon these translate to 3.9% and 6%.

No comments:

Post a Comment