VIX Index Volatility Forecast (04/07/2011)

The HyperVolatility team managed to efficiently forecast the VIX Index too. The last week were bearish this market because we were expecting to see the Index to close around 17% – 17.5% and effectively the implied volatility of the S&P500 collapsed even more than that.

The VIX traded around 20.5 on Monday but on Tuesday dropped to 19.1, on Wednesday it touched 17.2 whilst on Thursday it settled at 16.5 and closed at 15.8 on Friday.

The current volatility is 6% (20.7% monthly) and the TGARCH chart is obviously showing a curve which has almost completed its mean reverting process and that is about to settle around the 4% – 4.5% area (13.8% – 15.5% monthly) which has been the biggest “support” level for the conditional variance over the last 2 years.

The HyperVolatility team remains moderately bearish on the VIX but, like anticipated for the VXN analysis, it is unlikely that the implied volatility index of the S&P500 options will start trading below the 13% – 14.5%. Furthermore, some low intensity volatility rises should manage to keep the index around the aforementioned value.

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