VIX Index Volatility Forecast (27/02/2011)

The VIX rallied to 22% because the bearish movement provoked by the disorders in the Middle East pushed Equity Markets down but it suddenly dropped to 19.2% making our weekly forecast profitable!!!

The actual volatility is 9.8% (33.9% annualised) but such a spike is not going to last long and the very last part of the TGARCH curve clearly displays the beginning of a mean reverting process.

The volatility of the VIX Index is probably going to decrease over the last days and the index could touch the 18% -18.5% area by the next Friday.  However, many data related to the recovery of the global economy are going to be released this week and their announcement could imply some wild oscillation of the VIX

If an augment in market oscillations is going to happen, the volatility of the VIX could touch 14% (48.4% annualised) whilst the underlying Index is probably going to hit the 28%-30% zone.

The staff of HyperVolatility remains bearish on the VIX Index, hence, we will keep shorting S&P500 options whilst entering some longs on the American Index futures market. However, if the 23.5% threshold gets broken through we will reverse our positions.

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