#### Intro

The Volatility indicator (that can be found weekly in our newsletter) is a mean reverting indicator that measures the IV of the market over the last year. A high value suggests decrease and vise-verse: Low value suggest increase in volatility.

#### What does the indicator mean?

The indicator is based on the changes in the CBOE Volatility Index (VIX) - also known as "the fear index". It is a real time index that follows S&P 500 stock options. By calculating a weighted average of the current market prices for all out-of-the-money calls and puts for the front month and second month expiration it gives a good indications towards were the market is going.

The index's results are in percentage and marks the expected change in the S&P 500 index in the upcoming year, with probability of 68% - one standard deviation of the normal probability curve.

#### The math behind it

The indicator we publish is the relative rank of the most recent VIX value (on the day of publication) within the previous 252 days.

#### Hoe to read it

- Red - The current value is in the top 20th percentile of the 252 days.

This means that the volatility is high. You can expect that the volatility will go lower - Green - The current value is in the bottom 20th percentile of the 252 days.

This means that the volatility is Low. You can expect that the volatility will go higher - Yellow - The current value is in the between the top and bottom 20 percentile.

This means that the volatility is in in a normal range and shows no real range.