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VIX Index Volatility Forecast (23/01/2011)

The last week we were waiting for the VIX Index to rise because its volatility was historically too low and likely to jump back up again and effectively so it was.

The actual VIX volatility is 5.8% (92% in annual terms) and it should not get higher since the historical distribution of volatility displays that the 5.8% – 6% (92% – 95.2%) level has not been surpassed very often.

However, the news that is going to be released on Thursday could bring the index up and augment market fluctuations but there should not be great variations to the overall picture.

Moreover, the final part of the chart highlights the constant decrease in market swings and such a phenomenon should be interpreted as a bullish signal at least in the medium term.

Consequently, the staff of HyperVolatility suggests you to short VIX futures and long the S&P500 in order to profit from the negative correlation between them.

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