VSTOXX / VIX Spread May Imply An Equity Correction

Summary

• The VSTOXX / VIX spread tends to widen when the volatility indexes rally and equity markets decline.
• The longer the volatility indexes sit at their lows and the spread sits near its average (low), the greater the probability for the equity markets to experience a correction.
• Currently the VSTOXX / VIX spread is narrowing from an overbought range.

As I'm sure many of you are familiar with the VIX ($VIX) volatility index that measures the market's perspective of implied volatility 30 days into the future. The index is found at the CBOE. It is also known as the "fear index" as it tends to rally when the S&P 500 declines (downside volatility).
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There is another lesser known, but growing volatility index called VSTOXX found at the Eurex Exchange.  READ MORE

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Copyright ©2016 Mark Shore. Contact Mark Shore for permission for republication at info@shorecapmgmt.com Mark Shore has more than 25 years of experience in the futures markets and managed futures, publishes research, consults on alternative investments and conducts educational workshops.www.shorecapmgmt.com 

Mark Shore is also an Adjunct Professor at DePaul University’s Kellstadt Graduate School of Business, where he teaches the only known accredited managed futures course in the country. He is also a Board Member of the Arditti Center for Risk Management at DePaul University.

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