VXN Index Volatility Forecast (13/02/2011)

The previous week the staff of HyperVolatility forecasted a drop in the VXN Index and once again our “predictions” proved accurate and most importantly profitable.

Specifically, the VXN Index opened at 18.22% on Monday but suddenly decreased to 17.72% on Wednesday and closed at 17.18% on Monday: almost a perfect trade!!!

The VXN Index is now fluctuating around 7% (24.2% annualised) but the TGARCH plot is clearly displaying a downward sloping curve which will probably bottom around 4.5% – 5% (15.5% – 17.3% annualised). Such a drop will smooth the VXN Index fluctuations which are going to target the 15.8% – 16% area.

The staff of HyperVolatility remains bearish on the VXN Index even this week and we will try to adopt a combined strategy using both options and futures. We will short Nasdaq100 options and will go long the Nasdaq100 futures in order to profit from a recovery of the Nasdaq Index caused by a lowering of market fluctuations.

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