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Nations Volatility Indexes

Improved and Investable Measures of Option Cost, Implied Volatility, Option Skew, Tail Risk and Term Structure

All Nations® Option Cost Indexes use superior methodologies to generate more meaningful measures of option cost, implied volatility, option skew and tail risk and then express those measures in more meaningful, intuitive ways. The Nations® family of Volatility Indexes measure important facets of the option marketplace and do so for a tremendous range of asset classes including the first at-the-money volatility indexes for fixed income instruments. 

Nations® VolDex®

Nations® VolDex® is an improved measure of option volatility and the market’s expectations for fluctuations during the next 30 days.

VolDex® measures implied volatility the way practitioners do, by focusing on the most important, liquid options available, the at-the-money options in the next two expiration cycles.

Focusing on at-the-money options provides a pure measure of implied volatility, expectations for price fluctuations and fear without the misleading statistical noise generated by phenomena like the number of strike prices listed or the distance between those strike prices.

Nations® Indexes calculates VolDex® on a number of asset classes. The Nations® Large Cap VolDex® (ticker symbol: VOLI) uses options on SPY, the most active, liquid equity product in the world assuring the most accurate picture of large cap volatility.

VolDex® is a registered trademark of Nations Indexes, Inc.

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Nations® SkewDex®

Nations® SkewDex® provides the best available measure of option skew, an important gauge of investors’ willingness to buy protection in the form of put options and those investors’ willingness to assume risk.

Option skew is the difference in implied volatility among options with different strike prices but the same expiration.

Out-of-the-money put options tend to have higher implied volatilities as a result of the demand for put options to limit risk and the supply of covered calls to generate additional return.

Nations® Indexes calculates SkewDex® on a variety of asset classes providing the ability to compare skew, and fear, in different asset classes.

SkewDex® is a registered trademark of Nations Indexes, Inc.

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Nations® TailDex®

Nations® TailDex® is the only measure of the market’s expectations for an extreme event, often called a “tail event” or a “black swan,” which is a drop of at least three standard deviations.

TailDex® calculates the cost of protecting against such a drop, providing important insight into investors’ expectations.

TailDex® is model-free and robust from a mathematical point of view and since it uses instantaneous implied volatility to calculate standard deviation of returns it responds to current market conditions rather than relying on historical data.

Tail risk is an important consideration for market participants and history shows the occurrence of such loses is more frequent than most financial models anticipate.

TailDex® is a registered trademark of Nations Indexes, Inc.

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Nations Volatility Indexes

VolDex®

The Nations® Family of VolDex® Implied Volatility Indexes provide an improved measure of option prices and implied volatility. Nations® VolDex® Indexes measure the cost of options the way practitioners do, by focusing on at-the-money options.

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SkewDex®

The Nations® Family of SkewDex® Indexes provide the best available measure of option skew. By comparing at-the-money options to out-of-the-money put options, SkewDex® provides a clearer measure of option skew and relative expectations for market volatility.

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TailDex®

The Nations® Family of TailDex® Indexes measure the market’s expectations of an extreme event, often called a “tail event”. TailDex® provides a consistent measure of the market’s expectations that can be compared across time, market regimes, and asset class.

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CallDex®

The Nations® Family of CallDex® Indexes measure the cost of a one standard deviation out-of-the-money call option with 30 days to expiration. CallDex® provides a normalized price for this option giving a unique measure of implied volatility and expectations for equity index appreciation.

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PutDex®

The Nations® Family of PutDex® Indexes measure the cost of a one standard deviation out-of-the-money put option with 30 days to expiration. PutDex® provides a normalized price for this put option, an option which is particularly in demand by hedgers, giving a unique measure of implied volatility and expectations for equity index weakness.

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RiskDex®

The Nations® Family of RiskDex® Indexes measure the relationship between CallDex and PutDex and thereby provide unique insight into expectations for price action over the next 30 calendar days.

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TermDex®

The Nations® Family of TermDex® Indexes measure option term structure, the tendency for options with different expiration dates to display different implied volatilities.  Term structure can generate insight into market expectations and concerns regarding near-term catalysts.

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Nations VolDex Option Term Structure

Term Structure

VolDex term structure describes the implied volatility expressed by the VolDex methodology for the underlying asset across a range of times to expiration from 7 days to 360 days.  This view of term structure provides unique insight into expectations for volatility over the very short-term to the long-term.  The general shape of the term structure is generally upward sloping from left to right but the shape and degree of slope also provides insight into investors expectations.

When VolDex term structure is downward sloping, meaning short-term implied volatility is higher than 360-day implied volatility the market is suggesting it expects substantial realized volatility over the foreseeable future.  This can help investors and traders generate the best possible trade structures.

Below you can see the history of the VolDex Term Structure on SPY, the S&P 500 index ETF.

Nations Option Window®

Option Window®

Option Window describes the implied volatility landscape for the underlying asset across a range of ‘moneyness’ from one standard deviation below at-the-money to one standard deviation above at-the-money. This means Option Window graphically describes the normalized price of the most important options.

Option Window is a graph of the normalized price of options with precisely thirty days to expiration. This constant maturity is accomplished by interpolating option prices from the expiries immediately prior to, and immediately following, the moment thirty days from the moment of measurement.

Below you can see the history of Option Window on SPY, the S&P 500 index ETF.