VIX Index Volatility Forecast (13/02/2011)

The VIX Index fell as correctly forecasted by our staff last week and specifically a hypothetical short position taken the last Monday, with the VIX trading at 16.28% ,would have proved extremely profitable since the index closed at 15.69% the last Friday.

The current volatility of the VIX is around 7% (24.2% annualised) and it appears that the volatility of volatility is still decreasing because it has not reached its equilibrium point which is set to be at 5% (17.3% annualised). Consequently, the index should continue to drop in value and readings around the 14.8% -15% should be touched by the end of the upcoming week.

The staff of HyperVolatility is still bearish on the VIX Index since its volatility is again decreasing and therefore we will try to profit from such a phenomenon by adopting, even in this case, a combined strategy: we will go short S&P500 options and long some S&P500 futures.

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