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In fact, predicting volatility is a bit less hazardous compared with forecasting asset returns directly. That's related to the fact that volatility's long run expected return is zero. One benefit of this somewhat less-mysterious long-run future for volatility makes it useful for assessing risk levels as an indirect clue about market returns.
- Unusually low levels volatility, for instance, may be a sign that equity prices are ripe for a correction. In 2007, the year before the stock market suffered its worst calendar-year performance since the Great Depression, volatility was unusually low by historical standards.
- The opposite is also worth pondering. When volatility spikes, as it did in the financial crisis, the cyclical nature of the VIX suggests stock market performance may be set for better days.
-asr: Eon Kid confirmed this once on ET , that low volatality is sign of weakness/correction
hat's not surprising, given the intimate connection between volatility and markets. As noted Stock Market Volatility
(edited by finance professor Greg Gregoriou): "Volatility is an inevitable market experience mirroring 1) fundamentals, 2) information, and 3) market expectations. Interestingly, these three elements are closely associated and interact with each other."
(edited by finance professor Greg Gregoriou): "Volatility is an inevitable market experience mirroring 1) fundamentals, 2) information, and 3) market expectations. Interestingly, these three elements are closely associated and interact with each other."-------------------
Here is link for original PDF file ..
note: we found above charts only for Forex, I assume they must be available for all commodities like Energty, grains etc..
How to interpret BULL/BEAR chart
asr: can compare recover years like 2003 with 2009 for S&P ..
bull/bear chart consists of one composite pattern for bull years (solid line) and one for bear years (dotted line), with component contract years for each indicated in the box (“78” denotes 1978) for reference. Ratherthan chronologically, the order of contract years listed is determined by the degree of inclination/declination of the line best describing its scatterplot. In other words, the most bullish (as defined by comparing slopes) of the bull years is listed first, but the most bearish of the bear years is listed last.
That neither bull nor bear pattern reaches either 0 or 100 reflects a conscious decision made to better reproduce the vigor of dynamic trends. When MRCI constructs a 15-year pattern, averaged raw percentage values for each calendar day typically lie between 35 and 65—and are then blown out to between 0 and 100 to reflect greatest tgendency. That final step is not taken when constructing these bull/bear patterns, and thus each better represents the extent of the typical bull or bear move.
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trading Idea 3 using volatility
- high priced PUT/CALLs can be sold when Volatality is high knowing volatality will be down in a month or two.
- can see recovery years like 2003 for S&P INDEX and see volatality and sell volatility based on Quarter results before for 2009 assuming 2009 corralles to 20003.
How to interpret historic volatility charts
usng options on futures to place or protect positions or hedges can provide tremendous advantages, including additional flexibility, leverage, income, and/or reduced cash-flow problems and performance requirements.
However, one must understand the dynamics of option trading and the various components that create premium value to benefit from the opportunities they offer. The three primary variables that determine the value of an option premium are (1) the relationship of the underlying futures contract to the option’s strike price, (2) the time remaining until expiration, and (3) volatility.
Option volatility charts presented in this publication portray the 15-y ear average historical volatility (the central line) for the futures contract. The dotted lines above and below are each at 1 Standard Deviation (STD). Historical volatility remained between these two STD lines 68% of the time but was found above the upper one 16% of the time and below the lower one 16% of the time during the last 15 years.
Here is link for original PDF file ..
note: we found above charts only for Forex, I assume they must be available for all commodities like Energty, grains etc..
How to interpret BULL/BEAR chart
asr: can compare recover years like 2003 with 2009 for S&P ..
bull/bear chart consists of one composite pattern for bull years (solid line) and one for bear years (dotted line), with component contract years for each indicated in the box (“78” denotes 1978) for reference. Ratherthan chronologically, the order of contract years listed is determined by the degree of inclination/declination of the line best describing its scatterplot. In other words, the most bullish (as defined by comparing slopes) of the bull years is listed first, but the most bearish of the bear years is listed last.
That neither bull nor bear pattern reaches either 0 or 100 reflects a conscious decision made to better reproduce the vigor of dynamic trends. When MRCI constructs a 15-year pattern, averaged raw percentage values for each calendar day typically lie between 35 and 65—and are then blown out to between 0 and 100 to reflect greatest tgendency. That final step is not taken when constructing these bull/bear patterns, and thus each better represents the extent of the typical bull or bear move.
---
trading Idea 3 using volatility
- high priced PUT/CALLs can be sold when Volatality is high knowing volatality will be down in a month or two.
- can see recovery years like 2003 for S&P INDEX and see volatality and sell volatility based on Quarter results before for 2009 assuming 2009 corralles to 20003.
How to interpret historic volatility charts
usng options on futures to place or protect positions or hedges can provide tremendous advantages, including additional flexibility, leverage, income, and/or reduced cash-flow problems and performance requirements.
However, one must understand the dynamics of option trading and the various components that create premium value to benefit from the opportunities they offer. The three primary variables that determine the value of an option premium are (1) the relationship of the underlying futures contract to the option’s strike price, (2) the time remaining until expiration, and (3) volatility.
Option volatility charts presented in this publication portray the 15-y ear average historical volatility (the central line) for the futures contract. The dotted lines above and below are each at 1 Standard Deviation (STD). Historical volatility remained between these two STD lines 68% of the time but was found above the upper one 16% of the time and below the lower one 16% of the time during the last 15 years.
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