Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes (Wiley Trading) by Russell Rhoads

Author:Russell Rhoads [Rhoads, Russell]
Language: eng
Format: epub, mobi
Publisher: Wiley
Published: 2011-07-10T23:00:00+00:00

By taking the two closing prices and weighting them in this manner, the outcome is a closing price of 30.50. This sort of smoothing of the data will allow a better comparison of the closing price of the VIX with the underlying index. As this sort of comparison eliminates the time factor, this calculation creates a better futures-based reading to use as an indicator.

Figure 9.3 is a quick comparison of the spot VIX index and the VIX futures closing prices on a monthly basis from the beginning of 2007 to October 2010. Note that throughout the time period, the futures are at times at a premium or at a discount to the index, depending on the market's outlook for S&P 500 implied volatility.

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