Feb

10

An interesting metric to be tested from a Bloomberg article in a vein similar to Bill's metrics.

"This Unusual Link Between Stocks and Volatility Says the Turbulent Times Aren't Over"

The entire VIX futures curve is in backwardation, a signal that investors expect more volatility in the near-term. That's seen in the contract pricing, where front-month contracts are more expensive than second-month. The inverse is normally true.

"The M1-M2 VIX futures spread can be used as another temperature gauge for the market, just like spot VIX," said Dave Roberts, an independent trader of volatility derivatives and associated products. "That graph works really well in tight time frames when the curve is in extreme backwardation (like now) because the M1-M2 spread is currently very sensitive to the S&P 500's movements (both up and down)."


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  1. Adam Collins on February 10, 2018 3:20 pm

    Long-time reader, first time commenter.

    I’ve tested this. Criteria: exit SPY on Monday’s close if m1/m2 VIX futures are in backwardation as of last Friday’s close, otherwise be long. Historically, a mixed record. Image of tested scenario: http://oi63.tinypic.com/dhbqs0.jpg

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