We can use the VIX to gauge the future volatility in the S&P 500. Today we look at how well the VIX has been at predicting future volatility.Study
- S&P 500 (SPY) and S&P 500 IV (VIX)
- 2005 to present
- Computed and compared 30-day moves that were predicted by VIX to actual moves in SPY
- Compared selling 1 Standard Deviation Strangle (16 deltas on each side) in SPY managing @ 50%
- Compared at various percentiles
- VIX is often used to measure future volatility and future movement in the S&P 500.
- Historically, this measure has not been very accurate at IV lows or highs, usually overstating movement in the market.
- Selling premium in the S&P 500 via short options has been one way to profit from this disparity.