Sep 21, 2011

VIX Expiration

Over the last month we continued to see higher volatility in the market, but since last expiration volatility indexes were pretty much unchanged: VIX expired at 33.72, up 0.99 from 32.73, and VSTOXX closed on 44.14, up 9.10 from 35.04. It is clear that the debt crisis in Europe is adding upward pressure on VSTOXX. While VIX fell from the August highs, VSTOXX rose higher.

While my forecasts were quite off, they were accurate on the signal - both indexes were forecasted to go higher, and both did expire significantly higher than market predicted. For complete history of my forecasts see forecasts tracker page. For the next expiration, October 19 2011 my forecasts are:

        VIX to close at 31.99 vs 35.70 in futures 
        VSTOXX to close at 41.97 vs 40.70 in futures

This is unusual, since the forecast is for VIX futures to finish lower, while for VSTOXX futures to finish higher. While it can make sense from the economic point of view, in the past my forecasts did not perform very well when signs for VIX and VSTOXX were different. Good luck traders, and hedge your deltas!

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