RealVol Futures, RealVol Indices, VolX Stats,
RealVol Cones, and Research
VolX disseminates, on a daily basis, Listed RealVol futures, the RealVol Indices, the VolX Stats, and the RealVol Cones data via its own web site and through various quotation vendors.
The RealVol futures Data pages catalog both historical and current data, including settlement prices, volume, open interest, and intraday prices, for all listed RealVol futures on all underlying assets. Currently, RealVol futures are trading on the CME Euro FX Futures (6E).
In the future, as other contracts are added, there will be a new page dedicated to each underlying asset on which RealVol futures will trade.
A brochure in PDF format is available at RealVol Indices and VolX Stats.
The flagship index of the group is RealVol: The RealVol Index of Historical
Realized Vol. There are three backward-looking time frames: one month,
or 21 trading days 1RVOL; three months, or 63 trading days
3RVOL; and 12 months, 252 trading days, or one year, of
These reference indices are updated once daily, after the
close, and thus provide continual moving averages of the realized
volatility of the underlying asset over the three designated time
RealVol of Vol (RVOV)
Of course, volatility itself, like any other asset, displays
a volatility of its own value or price. The RealVol Index of RealVol of Vol, or RVOV, is designed to measure this volatility of
volatility, once again, over three backward-looking time frames:
one month, or 21 trading days 1RVOV; three months, or 63
trading days 3RVOV; and 12 months, 252 days, or one year,
of data 12RVOV.
As was the case for their RVOL counterparts, these RVOV reference
indices are updated once daily, after the close, and thus
are continual moving averages of the realized volatility
of volatility of the underlying asset over the three designated
Our web site provides a wealth of volatility-related information.
Among the many informative pages in the RealVol Indices section are
The RealVol Indices and the Historical
Realized Volatility Charts. The user has access to a substantial database
for a variety of asset classes, with historical information that,
in some cases, goes back as far as 30 years.
We also provide the RealVol Indices of forecast realized volatility, or FVOLs, as well. While the previous two indices were backward-looking, this third RealVol Index, FVOL, looks to the future. Our Index of Forecast Vol is calculated by the Volatility Institute of the NYU Stern School of Business, which is headed by Nobel laureate Robert Engle. Using a modification of professor Engle's pioneering GARCH volatility-forecasting methodologies, The Volatility Institute disseminates three indices that attempt to forecast realized volatility for the three time frames upon which the VolX Historical Indices are based.
A brochure in PDF format is available at RealVol Indices and VolX Stats.
Once the RealVol calculation period (CP) for RealVol futures begins,
VolX disseminates daily updated values, as calculated
by the RealVol daily formula, of the to-date realized volatility of the
underlying instrument on which the particular RealVol futures is based.
These PVOLs, or Partial Volatility Series, thus provide a
daily reference for traders of RealVol futures.
Throughout the life of any option, one can calculate the implied
volatility of the option's premium. Similarly, RealVol futures have
an implied-like pricing component of their own. By using the market
or settlement price of RealVol futures along with the PVOL and a
root-mean-square formula, one can infer the traders' collective volatility
forecast embedded in the RealVol futures' price. (See the separate
discussion of Inferred Volatility,
or IVOL, under RealVol futures.)
Finally, in similar fashion to the FVOL series' forecasts of
one-month, three-month, and one-year realized volatility, the
Volatility Institute will provide GARCH Vols, or GVOLs, which
forecast, using the modified GARCH methodology, expiration
values for existing RealVol futures over all time frames offered.
Traders thus have yet another customized tool to help them
in their assessment of future realized volatility, as they trade
The VolX Methodology for Calculating RealVol Indices and VolX Stats
When Underlying Futures Contracts Roll Over
In the calculation of all RealVol Indices (RVOL, RVOV, and FVOL) or 12VOL series (PVOL, IVOL, or GVOL) values, if futures contracts are the underlying asset from which these values are derived*, there comes a point where the front-month futures contracts, whose daily settlements are used to form the log-returns that are furnished to the RealVol daily formula, expire. And, it is logical to assume that the previously deferred month, which now becomes the new front month, then becomes the contract upon which further returns are based.
The process, however, is not without a potential complication, which needs to be explained. Futures contracts are, as their name implies, a prediction — a forecast of a future event. As such, their values are predicated upon many factors, and so it is natural to assume that when one futures contract expires, the next one, chronologically, which may not expire until one month, or perhaps three months, later, may differ in price from the recently expired one. Clearly, when one endeavors to calculate the realized volatility of the underlying asset, such a “jump” in successive daily closing prices could be problematic. Why? Consider the following.
Suppose that a March futures contract on some underlying has just expired at a price of 100. Suppose, further, that, at that very moment of expiration, the deferred June contract is trading at 102. Finally, suppose that, in the next day’s trading, the June futures remain unchanged and close once again at 102. In the calculation of a continuing series of closing-settlement returns, one might use the March contract until it stops trading. In this case, the final price is 100. For the next trading day, there is zero interday volatility, because the market is unchanged, and yet the new closing reference point would be 102 — that of the June contract. In the calculation process, were one to simply “roll” from March into June, there would be the appearance of a two-point jump in the reference prices, from 100 to 102, implying an interday realized volatility when, in fact, there is none.
To address this potential problem, The Volatility Exchange resorts to a rollover process, whereby, on the day following the expiration of a futures contract, the previous day’s settlement price of the next contract (now the front month) is used to calculate the next return of RealVol Indices and 12VOL series for the underlying, if futures are the underlying. For example, in the above scenario, let us attempt to calculate a VolX 3RVOL (an Index of Three-Month realized volatility) return, upon expiration of the March futures contract. To ensure continuity of pricing, without the possibility of a “false jump,” one would immediately resort to referencing the settlement price of the June contract, on the expiration day of the March contract, and one would use that price as the first of two that would form the first June return, thereby avoiding any possibility of a gap or jump in price, when the March contracts roll over to June.
VolX will apply this procedure for the calculation of all of RealVol Indices and VolX 12VOL series that use futures as the underlying, thereby providing accurate assessments of the underlying assets’ volatilities, without the potential of any artificial “price movement” caused uniquely from the futures rollover process.
*Note: Not all RealVol Indices use futures contracts as the underlying asset; some indices may be based upon a spot, cash, or index as the underlying.
Volatility cones provide a way to look at RealVol index information on the ranges of realized volatility for different time periods over various "look back" windows. Seven colored lines are provided. For each time period, a maximum, minimum, median, and percentiles of 90%, 70%, 30%, and 10% are furnished. Each value should be interpreted as: x% of the time, volatility for this time period (horizontal axis) and for this look-back period (chosen from the menu above) was less than or equal to the value displayed in the aqua header.
For a complete discussion and explanation of this topic, please see Volatility Cones Come In
New Flavors, provided courtesy of Option Pit.
This simple simulation is intended to show one use of RealVol futures as a hedge for the volatility exposure of an options book. The example assumes that the options position is established at the start of the RealVol calculation period (CP) for the quarter selected and is held to expiration. It is also assumed that the follow-up hedges take place at the daily settlement price of the futures contract and the daily theoretical value of RealVol futures with no commissions or slippage. The intention of this simulation is not to provide participants with software to enable them to hedge their specific options book, but rather to show the risk-reduction potential of utilizing RealVol futures for this purpose.
For a complete discussion and explanation of this topic, please see Volatility Hedging — Turn Up the Static!
To summarize: VolX disseminates, on a daily basis, settlement and intraday prices of currently listed RealVol futures, as well as volume and open interest information. Nine RealVol Indices based on the underlying asset (three each of RVOL, RVOV, and FVOL) and several VolX Stats based on a particular VolContract (PVOL, IVOL, and GVOL) are also furnished.
Another way to consider these six measures is that three are backward-looking (RVOL, RVOV, and PVOL), while three more are forward-looking (FVOL, IVOL, and GVOL). All are designed to be informative reference gauges that measure various aspects of realized volatility both retrospectively and prospectively.
RealVol cones provide another way to look at RealVol information on the range of realized volatility over different time periods and for various "look back" windows.
Our Portfolio Hedging Simulation highlights the considerable hedging capabilities of RealVol futures overlays on an options portfolio.
Copyright 2018 RealVol LLC. All rights reserved
• Site Map