VIX Index Volatility Forecast (20/02/2011)

The VIX Index went through a quite choppy week because it opened at 15.9%, it topped at 16.7% and then closed at 16.4%. The movement of the VIX Index was almost the same one experienced by the VXN Index.

The current volatility is now around 6% (20.7% annualised) and although it decreased, as correctly forecasted the last week, the VIX unexpectedly rallied. However, the boost was not that strong and the fact that the volatility of the VIX has not really changed means that the surprising augment was only temporary.

The staff of HyperVolatility is still bearish on this market because its volatility is still diminishing and this is going to flatten the VIX Index itself and favours a further improvement of the S&P500. We will then adopt a combined approach by shorting S&P500 options and buying S&P500 futures.

Finally, some wild short term fluctuations could be seen on the last 2 days of the week.

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