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VIX Index Volatility Forecast (01/02/2011)

The suggestion we gave you to go short VIX futures was extremely valuable if we exclude Friday’s session where the VIX Index rose to 20.04% from 16.15%.

However, the volatility plot of the VIX is almost unchanged and the curve which is now at 5% (79.35% in annual terms) will probably continue to drop in order to touch the equilibrium level which is set to be around 4.2% (63.48% annualised).

However, some important news is going to hit the market during this week and consequently great caution is needed during those hours since an unanticipated increase in volatility is not a probability to exclude.

The staff of HyperVolatility suggests once again to short VIX futures although maximum attention will be needed during market movers announcements.

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