Draft:VolDex
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VolDex is a closed-form measure of precisely at-the-money option implied volatility. It was created by Nations Indexes, Inc. and is calculated on a wide range of asset classes including the S&P 500, Nasdaq-100, Russell 2000, treasury bonds, gold, silver, and a range of stocks popular with option traders including Apple, Nvidia, Tesla, Microsoft and others.
As a closed-form measure, VolDex returns an explicit value for implied volatility without the iterative method traditionally used to calculate implied volatility. VolDex also measures precisely at-the-money implied volatility rather than the weighted average of all listed strike prices used by variance swap methodologies like VIX. When used with other indexes this allows market participants to deconstruct skew and comprehend changes to implied volatility in discrete regions of the range of strike prices.
This focus allows VolDex to be calculated on a wide range of tenors including 0DTE, 1DTE, 7-days, 30-days, etc. Nations Indexes currently calculates VolDex on these tenors and longer-dated tenors including 360 days. 30-day VolDex on SPY, the S&P 500 ETF, is calculated in real time and is publicly available under the ticker symbol VOLI.[1]
As a measure of implied volatility, VolDex is an estimate of the market's expectations for realized volatility over the relevant tenor.
Construction
[edit]VolDex is calculated using the first in-the-money and first out-of-the-money call and put options and expirys bracketing the the tenor (e.g., 30-day VolDex uses an expiry prior to 43,200 minutes, the number of minutes in 30 days, from the moment of calculation and an expiry that occurs after that moment in the future.
The forward prices for those expirys are computed using put/call parity and this forward price is the precisely at-the-money level. Option prices are interpolated to achieve hypothetical precisely at-the-money put and call prices. These are then used to calculate VolDex.
30-day VolDex values generally use options which expire in Fridays and at the open of trading each Thursday morning the component expirys "roll" to those Friday expirys which are 29 days and 36 days in the future.
Historical Values
[edit]VolDex on the S&P 500 (ticker VOLI) was first calculated on January 31, 2005.
| VOLI Daily Results | |
|---|---|
| Average Close: | 17.37 |
| Median Close: | 14.80 |
| High Close (November 20, 2008): | 85.64 |
| Low Close (October 5, 2017): | 6.56 |
| Correlation to VIX: | 0.96 |
| Standard Deviation of Daily Change: | 8.21% |
| Beta (vs. VIX): | 1.00 |
| R-Squared (vs. VIX): | 0.92 |
References
[edit]- ^ "VOLI Fact Sheet" (PDF).
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