VXN Index Volatility Forecast (19/09/2011)

The VXN Index opened at 37.97 on Monday, dropped to 36 on Tuesday, plunged to 33.36 on Wednesday, touched 30.67 on Thursday and closed at 29.36 on Friday.

The current volatility is 6.1% (21.1% monthly) and the volatility curve seems now ready to complete its mean reverting journey which should end around the 4% – 4.5% threshold (13.8 -15.5% monthly) although some short term retracements are still likely to occur over the next trading hours.

The volatility of the VXN Index is clearly signalling that in the upcoming hours the implied volatility of the Nasdaq100 options should diminish but such a scenario is going to hold only if the concerns regarding European debt are going do not unleash an ulterior sell off.

The HyperVolatility team is moderately bearish the VXN Index which could eventually retest the 25% level by Friday. Nevertheless, the likelihood of a short term explosion of the conditional variance remains pretty high because despite the numerous meeting European politicians appear unable to come up with a concrete plan which would save Greece and prevent a domino effect which would destroy the entire old continent economies.

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