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VIX per day

Discussion in 'Options' started by runningman, Dec 28, 2008.

1. runningman

If VIX is say 46, how do you figure the daily volatility? I know its not as easy as dividing by 365, IIRC you divide by a square root of something.

2. gkishot

VIXdaily = VIXannual / sqrt(252)

3. dmo

The current VIX calculation uses calendar days to expiration, not trading days to expiration. So I think you would use sqrt(365) rather than sqrt(252). I can see a rationale for both ways but on balance, if we're using calendar days I would stick with calendar days throughout.

4. runningman

thanks- should this number correlate with ATR(30) at all? Is there any comparisons between the 2 numbers? Should there be?

5. dmo

Volatility correlates with the median range. If you multiply volatility x .675 you will get the median range.

Example: daily volatility is 4%. That means that 68.3% of the time, daily movement will be less than 4% up or down (assuming a normal distribution).

4% x .675 = 2.7%. So 50% of the time daily movement will be less than 2.7% up or down, and 50% of the time daily movement will be > 50% up or down.

Is this what you mean by average true range?

6. runningman

Where does the .675 come from? I assume the 68.3% is 1 stdev. I'm just wondering how closely ATR correlates with the IV of a stock's option. Or if there's even a point to make a comparison between the two.

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