Volatility- Volatility indexes as indicators for S&P 500
Will the return of the pandemic cause S&P 500 index to tumble again in the future?
We suggest Volatility index for your reference. It reflects both the volatilities and the current level of market panics. Aside from S&P 500 index, there are also volatility indexes for China, Emerging markets, crude oil and gold. They can signal when you should reduce exposure.
Cboe Volatility Index
According to Cboe, the volatility indexes measure the market's 30-day expectation of volatility implicit in the prices of options. All indexes have a window of the future 30 days, except for S&P 500 index, which also has 9-day, 3-month and 6-month volatility indexes.
We display them in the following four categories:
The US Market
- S&P 500 Volatility Index (VIX)
- NASDAQ 100 Volatility Index (VXN)
- Dow Jones Volatility Index (VXD)
- Russell 2000 Volatility Index (RVX)
- S&P 500 9-day Volatility Index (VIX9D)
- S&P 500 3-month Volatility Index (VIX3M)
- S&P 500 6-month Volatility Index (VIX6M)
- Cboe EFA ETF Volatility Index (VXEFA)
- Cboe Emerging Markets ETF Volatility Index (VXEEM)
- Cboe China ETF Volatility Index (VXFXI)
- Cboe Brazil ETF Volatility Index (VXEWZ)
Commodities and Forex
- Cboe Crude Oil ETF Volatility Index (OVX)
- Cboe Gold ETF Volatility Index (GVZ)
- Cboe Energy Sector ETF Volatility Index (VXXLE)
- Cboe Gold Miners ETF Volatility Index (VXGDX)
- Cboe Silver ETF Volatility (VXSLV)
- Cboe EuroCurrency ETF Volatility Index (EVZ)
- Cboe Equity VIX on Apple (VXAPL)
- Cboe Equity VIX on Amazon (VXAZN)
- Cboe Equity VIX on Google (VXGOG)
- Cboe Equity VIX on IBM (VXIBM)
- Cboe Equity VIX on Goldman Sachs (VXGS)
Volatility in the Market
Small-cap stocks usually show greater volatility.
▌ The US stocks
In the US stock market, for example, Russell 2000 shows higher volatility than large-cap stocks.
▌ S&P 500 Volatility Index
In a bullish market, short-term volatility is lower than long-term volatility. So in normal times, VIX9D is the lowest and VIX6M is the highest.
Once the market starts panicking, however, volatility skyrockets and short-term volatility rises much faster than long-term volatility. As volatility rises, market risks increase.
▌ Commodity Volatility
Volalitliy index and its target index share a negative correlation. Volatility remains steady when no particular threats are posed. But when uncertainties or any geo-political factors surface, volatility tends to surge.
- Volatility index and its target share a negative correlation.
- Small-cap stocks show more volatility than large-cap stocks do.
- In normal times, short-term volatility is lower than long-term volatility.
- Volatility surges because of market panics.
What does it tell us?
While volatility index is usually viewed as a coincident indicator, we think S&P 500 volatility spread can tell us much more than that.
When 9-day and 6-month volatility spread turns negative— short-term volatility moves higher than long-term volatility— the market risks are high and investors should watch out for greater risks to come and reduce equity exposure.
S&P 500 volatility spread can thus been seen as an indicator for market risks.
Follow our new Volatility Dashboard to discover more insights for your investment.
The future with COVID-19
Volatility spread for S&P 500 index dived deep into the negative territory in March when the stocks plummeted, indicating tremendous market panics. As the pandemic still looms, investors should take the volatility spread into account.
The market has shown corrections concerning over another wave of infection and lockdown. Volatility spread only went below zero on the 11th of June. We think the volatility spread will continue to be indicative of future risks.
|發行地||投資標的||Price||1 Month||YTD||Expense Ratio|
|SPDR S&P 500 ETF Trust||$433.63||-3.05%||15.98%||0.09%|
|iShares Core S&P 500 ETF||$436.98||-2.72%||16.41%||0.03%|
|Vanguard Total Stock Market ETF||$225.05||-2.29%||15.62%||0.03%|
|Vanguard S&P 500 ETF||$400.04||-2.72%||16.40%||0.03%|
|Invesco QQQ Trust||$366.15||-1.90%||16.70%||0.20%|
|#Equity-Region: US #Volatility|