Sunday, January 4, 2009

VIX and More Subscriber Newsletter Glossary


AMSI – Aggregate Market Sentiment Indicator: a VIX and More proprietary sentiment indicator that incorporates components of volatility, put to call data, market breadth, volume and other factors 

Aggressive Trader Model Portfolio – a a mechanical, long-only, aggressive growth portfolio of 5 stocks that was launched on 3/30/08 and is evaluated for rebalancing every weekend. The portfolio is typically 100% invested in U.S. equities and ADRs. It is non-diversified and has extremely high turnover, generally >1000% per year. 

backwardation – a downward sloping term structure curve in a futures product (e.g., VXX, VXZ) in which front month futures are priced higher than back month futures 

contango– an upward sloping term structure curve in a futures product (e.g., VIX, crude oil, natural gas, etc.) in which front month futures are priced lower than back month futures 

Contango Index – a VIX and More proprietary index that evaluates the degree of negative roll yield across all outstanding VIX futures contracts on a scale of 0-100.  A high number means a high degree of negative roll yield across the full term structure and a low number means a positive roll yield across the full term structure.   A value of 50 is a considered the median reading and actually indicates some small amount of negative roll yield, as the full VIX term structure is typically in contango.

CVOL– ticker for the C-Tracks ETN on CVOL, which targets VIX futures with three to four months of maturity, utilizes 2x leverage, and also includes a dynamic short position in the S&P 500 index 

DJIA – ticker/abbreviation for the Dow Jones Industrial Average: the U.S. equity index that is most widely tracked by the media and the general public 

EAFE – the MSCI EAFE Index of developed countries from Europe Australasia and the Far East (excludes the U.S. and Canada) and basis for the popular EFA ETF 

EEM – ticker for an ETF that tracks the MSCI Emerging Markets Index 

EFA – ticker for an ETF that tracks the MSCI EAFE Index of developed countries from Europe Australasia and the Far East, which excludes stocks from the U.S. and Canada 

EMA exponential moving average: applies an exponential weighting so that most recent data points in a series are given greater weight in the calculation of a moving average 

ETFexchange-traded fund: a group of stocks that often resemble a mutual fund in composition, but can be traded much like a stock during the trading day 

ETN – exchange-traded note: similar in most respects to an ETF, except that ETNs are technically a debt security of the issuer 

ETP – exchange-traded product: in an effort to simplify nomenclature and gloss over the distinctions between ETFs and ETNs, I am using the ETP name to describe a superset of exchange-traded products consisting of both ETFs and ETNs 

FOMC Federal Open Market Committee: plays a lead role in establishing U.S. monetary policy by setting target Fed Funds rates 

Focus Foreign Growth Model Portfolio – a mechanical, long-only, aggressive growth portfolio of 5 stocks that was launched on 3/30/08 and is evaluated for rebalancing every weekend. The portfolio is typically 100% invested in ADRs. It is non-diversified and has high turnover, generally >1000% per year. 

Focus Growth 2 Model Portfolio – a mechanical, long-only, aggressive growth portfolio of 5 stocks that was launched on 8/31/08 and is evaluated for rebalancing every weekend. The portfolio is typically 100% invested in U.S. equities and ADRs. It is non-diversified and has high turnover, generally >500% per year. 

GVIX Global Volatility Index: a VIX and More proprietary index which is derived from a weighted average of the implied volatility in options for equities in the 15 largest global economies 

HV – historical volatility: a measure of actual volatility in the price of security over a specified period of time, typically calculated in terms of standard deviations from the mean of a data series 

IV – implied volatility: a measure of estimated future volatility in the price of a security as derived from options prices 

LW – last week 

McClellan Summation Index –  A running total of the difference between the 19-day and 39-day exponential moving averages of the net difference between the NYSE advancing issues minus declining issues (more)

Mean Reversion Index –  VIX and More proprietary index that Evaluates the likelihood that the VIX will decline due to the effect of mean reversion on a scale of 0-100.  The calculations in this index incorporate short-term, medium-term and long-term VIX moving averages in order to handicap the likelihood that the current level of the VIX will return to a prior trading range.  A high number means that the VIX is above most or all of its moving averages and is expected to decline going forward; a low number means that the VIX is below most or all of its moving averages and is likely to rise going forward.

NDX – ticker/abbreviation for the NASDAQ-100 Index: an index of the largest domestic and international non-financial securities listed on The NASDAQ based on market capitalization 

Retro VIX – calculates a backward-looking "VIX" based on realized volatility in the SPX over the course of the last 21 trading sessions 


Roll Yield Index - a VIX and More proprietary index that Evaluates the degree of negative roll yield between the front month VIX futures and the second month VIX futures on a scale of 0-100.  A high number means a high degree of negative roll yield (second month much higher than front month) and a low number means a positive roll yield (second month lower than front month.)  A value of 50 is a considered the median reading and actually indicates some small amount of negative roll yield, as these two months are typically in contango.

RUT – ticker/abbreviation for the Russell 2000 Index: measures the performance of the small-cap segment of the U.S. equity universe 

SMA simple moving average: unweighted mean of a data series 

SOTW – stock of the week 

SPX – ticker/abbreviation for the Standard and Poor’s (S&P) 500 Index: de facto standard of U.S. equity indices for investors 

SPX hv20– the 20-day historical (aka statistical, realized or actual) volatility for the SPX 

USO – ticker for the U.S. Oil Fund, an ETF that tracks the movements of light, sweet crude oil, a.k.a. West Texas Intermediate 

VIX Futures Contango Index [often shortened to Contango Index] – a VIX and More proprietary index that evaluates the degree of negative roll yield across all outstanding VIX futures contracts on a scale of 0-100.  A high number means a high degree of negative roll yield across the full term structure and a low number means a positive roll yield across the full term structure.   A value of 50 is a considered the median reading and actually indicates some small amount of negative roll yield, as the full VIX term structure is typically in contango.

VIX sma10 – a 10-day simple moving average for the VIX (CBOE Volatility Index), which measures the expected 30 day volatility that is implied by options in the SPX 

volatility crush – a dramatic decrease in implied volatility, often associated with the passing of a major news events such as earnings or an FDA decision on a drug application 

vs. 10d/20d/50d/200d – current price relative to 10/20/50/200 day simple moving average 

vs. LW – percentage change since last week (for non-holiday weeks, this is equal to current price relative to the 5 day simple moving average) 

VXV – ticker for the CBOE S&P 500 3-Month Volatility Index, which measures the expected 93 day volatility that is implied by options in the SPX 

VXX – ticker for the iPath S&P 500 VIX Short-Term Futures ETN, which targets VIX futures with one month to maturity 

VXX roll yield – net differential between VIX front month futures and VIX second month futures 

VXZ – ticker for the iPath S&P 500 VIX Mid-Term Futures ETN, which targets VIX futures with five months to maturity 

XHB – ticker for the homebuilders sector SPDR, an ETF

+XIV Index
 VIX and More proprietary index that is a composite index which incorporates a dynamic weighted average of the Roll Yield Index, the Contango Index and the Mean Reversion Index in an effort to determine the attractiveness of a long XIV and/or short VXX position from a risk-reward perspective.  The weights change each week, but generally the Roll Yield Index has the highest weighting, followed by the Mean Reversion Index and the Contango Index.  While the index has theoretical values of 0-100, most readings cluster around the 40-60 range.  Additionally, while 50 is considered a median reading, note that this should be interpreted as a long XIV and/or short VXX position as having ‘median attractiveness.’  

XLF – ticker for the financial sector SPDR, an ETF 

XLY – ticker for the consumer discretionary sector SPDR, an ETF

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