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LIVE MARKETS-Nasdaq 100: Is volatility of volatility about to vault?

Tue, 20th Oct 2020 14:29

* U.S. equity index futures suggest opening gains
* Markets await stimulus negotiation outcome
* European indexes mixed; Japan dipped, China gained overnight
* Dollar, NYMEX crude, gold down; US 10Y T-note yield ~0.78%

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NASDAQ 100: IS VOLATILITY OF VOLATILITY ABOUT TO VAULT? (0915 EDT/1315 GMT)
The Nasdaq 100 has recently been on a slippery slope. Indeed, this index, dominated
by the tech titans, has fallen nearly 4% over 5 straight trading days.
Meanwhile, the Nasdaq 100 volatility index appears primed to rise, suggesting the
potential for greater instability. (Click on chart below)
The VXN's Bollinger Band (BB) width, a historical volatility measure, is now at 0.4 on a
weekly basis, which puts it below its January 2020 trough of 0.43, and at its lowest level since
September 2018, when it bottomed at 0.36.
In the wake of the implied volatility index's September 2018 and January 2020 BB width lows,
the VXN ultimately spiked and the NDX suffered severe declines.
Volatility of volatility could contract further, but in the event it starts to rise, the NDX
may quickly pick up speed on the downside.



(Terence Gabriel)
*****


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(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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