Canadian VIX: TSX to have their own volatility index

I don't know if anyone noticed, but in my previous post discussing the TSX, I included a chart of VIX (S&P500 volatility index) versus S&P 500. VIX is one of the market indicators that I can't live without. However, as much as the Canadian and the American equity markets are correlated, they are still separate markets. So using the VIX vs. S&P500 on an analysis of the TSX is like borrowing salt from thy neighbour. But there's no more need for that soon as TSX is finally getting its own volatility index starting Monday (October 18)! This is to replace the MX Implied Volatility Index (MVX) from the Montreal Exchange, which I didn't have access to previously (aside from data published on their website). One question I have is that the TSX VIX will be based on TSX 60 index options activity according on their press release, but the TSX 60 index options isn't that active. So would the TSX VIX be as efficient as the S&P500 VIX? An opportunity with the introduction of TSX VIX on the Toronto Exchange is that I can now place bets on market volatility in my self-directed RRSP trading account. Which is arguably more predictable than the underlying index these days... In any case, this will be a vital market indicator for Canadian market traders. For more information on TSX VIX, see the product information page on Standard & Poor's. And a hat tip to Option Matters (Montreal Exchange's blog on options) for this news.

Posted 14 October 2010 in stocks.