VXN FEAR PREMIUM
APPLICABLE TIME FRAME(S):
SHORT / INTERMEDIATE
UPDATE SCHEDULE:
Each weekday night by 7:00 PM EST
EXPLANATION:
The VXN Fear Premium is the exact same indicator as the VIX Fear Premium, only it is calculated off the Nasdaq 100 instead of the OEX. The concept, calculation and interpretation behind the indicator are exactly the same.
GUIDELINES:
Similar to the VIX Fear Premium, when this indicator is high, it is showing that traders are pricing in a large amount of future volatility compared to what was seen in the recent past. This is a sign of uncertainty and is often seen near market lows. Conversely, when traders are pricing in lower volatility than what has been seen, and the VXN Fear Premium declines to an extremely low level, then that is a sign of comfort and often coincides with market peaks.
STATS:
| Since 2001 | |
| Mean | 3.0 |
| St. Dev.* | 7.0 |
| Maximum | 18.0 |
| Minimum | -19.4 |
*Standard Deviation. See below...
68% of readings (1 standard deviation) should be between -4 and 10
95% of readings (2 standard deviations) should be between -11 and 17
99% of readings (3 standard deviations) should be between -18 and 24
In other words, we should expect a reading under -11 or over 17 approximately 13 times per year. Since such a reading would be relatively unusual, it suggests that we may be seeing an unsustainable trend. These figures assume a normal distribution curve.
ADDITIONAL RESOURCES:
Chicago Board Options Exchange (www.cboe.com)
© 2005 Sundial Capital Research, Inc. All Rights Reserved.