Predicting Market Moves Using VIX | What Else Ya Got
How the
VIX is used to calculate the expected move of the
S&P; 500 and how you can use it when selling premium!
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The VIX is often used a measure of volatility for the overall market. This makes the VIX very useful in that we are able to calculate the expected move of the S&P; 500 over the next
30 days, using the VIX. However, this raises the question, how accurate is the VIX at predicting these moves?
Today,
Tom Sosnoff and
Tony Battista answer this question.
First, they show the formula for calculating the expected move using the VIX. Then they guys see how accurate the VIX has historically been at predicting these moves. They find out that it is very accurate but tends to overstate.
Next, the guys look at the
difference between a low VIX and a high VIX. They find out that both environments overstate the actual moves of the S&P; 500 but when the VIX is high, it provides more premium in the options and a larger edge!
Nobody rants like these ex-floor traders. Tom Sosnoff and Tony Battista touch on topics no body else wants to go near.
You can watch a new What
Else Ya Got? episodes live and check out all previous episodes everyday at http://ow.ly/EoyGW!
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