VIX

Posted bynzb
  • VIX:  constant measure of 1-month implied volatility of SPX Index options. 23 days and less than 37 days to the Friday SPX expiration are used to calculate the VIX Index. These SPX options are then weighted to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index.
  • VIX9D: estimates the expected 9-day volatility of S&P 500 stock returns. Derived by applying the VIX algorithm to SPX options, but it uses SPX options with expiration dates that bracket a nine-day period of time. VSTN and VSTF are variations of VIX9D that estimate the expected volatility of S&P 500 stock returns from the near term and far term SPX option series used to calculate VIX9D.
  • VIX3M: constant measure of 3-month implied volatility of SPX Index options. Different from 3mth VXM futures as futures are for VIX in 3 months, not average over 3 months.
  • VIX6M: constant measure of 6-month implied volatility of SPX Index options. Different from 6mth VXM futures as futures are for VIX in 6 months, not average over 6 months.
  • VIX options: $100 per point. 0.01 tick<$3. Expires Wednesdays. 930am to 415pm US EST, with global hours 8.15pm to 915am, with VIX calculated 315am to 915am and 930am to 415pm. Settlement based on VIX.
  • VIX mini futures (VXM):  $100 per point. 0.01 tick. 930am to 4pm US EST. LMT orders allowed 4pm to 5pm (then 1 hr break) and 6pm to 930am. Trading hours for expiring VXM futures contracts end at 9am US EST on the final settlement date. Settlement value is SOQ of VIX on futures expiry date. Cash settlement on the business day immediately following the settlement date.

How make money: Futures and options vs VIX, as they settle at VIX (VIX9d is irrelevant), potentially with VIX trend filter (VIX9d vs VIX or VIX EMA) or futures trend filter (VXX EMA).

  1. Short future if VIX is below futures price (contango) (VIX<VIX3M can be a guide) AND trend of VIX (eg VIX9D<VIX) or VXX (futures) is up: VPN system with VIX/VIX3M<1
  2. Long future if VIX > futures price (backwardation) (VIX>VIX3M and VIX>VIX6M can be a guide) and trend of VIX (eg VIX9D<VIX) or VXX (futures) is up: VIXM spike system, with EMA(VIXM) exit.
  3. Long option if VIX raised (25-40) and trend – potential for more and ideally VVIX is low (cheap options).