Hxro Volatility Indices

Hxro BTC Volatility Indices (.XBTCVOL)

Hxro Labs realized volatility products analyze high frequency pricing data from multiple exchanges to quantify volatility of returns in the market. These volatility products do not indicate what will happen in the future. This data presents a statistical metric of what happened in the recent past and is used to make educated decisions about what might happen in the future.

Realized volatility is the fundamental component of models used to price risk in the derivatives market. Implied volatility is the amount of risk implied by the exchange-traded prices of options in the market. Implied volatility quantifies the options market’s expectation of price movement in the future while realized volatility quantifies the actual, observed price movement.

Hxro calculates realized volatility as the standard deviation of logarithmic returns of the asset during a defined period of time, assuming a mean of zero, with no degrees of freedom.

See the formulas section at the bottom.

Daily BTC Realized Volatility Index (.XBTCDVOL)

• The Hxro Daily Volatility Index is the rolling 24-hour realized volatility of the Hxro BTC Index (.XBTC).
• The standard deviation of logarithmic returns of the past 1440 1-minute .XBTC index settlements.
• In a normal distribution, approximately 68.2% of outcomes fall within one standard deviation (SD) of the mean. In other words, approximately 68% of the observed returns from the past day are within 1 SD and 32% of the observed outcomes are outside the 1 SD range of returns. 

Daily Vol Simplified:

Assume the latest calculation of the Hxro Daily BTC Realized Volatility Index is 2.61.

• Based on the price movement from the past 24 hours, there is an approximately 68% probability that BTC will be within a range of plus or minus 2.61% in a 1-day period.

• Based on the price movement from the past 24 hours, there is an approximately 32% probability BTC moves greater than plus or minus 2.61% in a 1-day period.

Weekly BTC Realized Volatility Index (.XBTCWVOL)

• The Hxro Weekly Realized Volatility Index is the rolling 7-Day realized volatility of the Hxro BTC Index (.XBTC).
• The standard deviation of logarithmic returns of the past 10,080 1-minute .xBTC index settlements (1440 per day * 7 days).

Weekly Vol Simplified:

Assume the latest calculation of the Hxro Weekly BTC Realized Volatility Index is 8.26.

• Based on the price movement from the past 7 days, there is an approximately 68% probability that BTC will be within a range of plus or minus 8.26% in a 7-day period.

• Based on the price movement from the past 7 days, there is an approximately 32% probability BTC moves greater than plus or minus 8.26% in a 7-day period.

Monthly BTC Realized Volatility Index (.XBTCMVOL)

• The Hxro Monthly Realized Volatility Index is the rolling 30-Day realized volatility of the Hxro BTC Index (.XBTC).
• The standard deviation of logarithmic returns of the past 8,640 5-minute .xBTC index settlements (288 per day * 30 days).

Monthly Vol Simplified:

Assume the latest calculation of the Hxro Monthly BTC Realized Volatility Index is 27.72.

• Based on the price movement from the past 30 days, there is an approximately 68% probability that BTC will be within a range of plus or minus 27.72% in a 30-day period.

• Based on the price movement from the past 30 days, there is an approximately 32% probability BTC moves greater than plus or minus 27.72% in a 30-day period.

Hxro Annualized Realized Volatility Indices

The Annualized RV indices normalize volatility into annual terms.

Annualization is important when comparing RV to many other financial statistics, including the implied volatility of options, value-at-risk analysis, and risk-adjusted performance data.

Annualized Daily RV Index (.XBTCADVOL)

The Annualized Daily RV Index is calculated by annualizing the Daily Realized Volatility Index, or multiplying it by the square root of 365, as there are 365 trading days in the year. 

Annualized Weekly RV Index (.XBTCAWVOL)

The Annualized Weekly RV Index is calculated by annualizing the Weekly Realized Volatility Index, or multiplying it by the square root of (365/7), the number of weeks in a year.

Annualized Monthly RV Index (.XBTCAMVOL)

The Annualized Monthly RV Index is calculated by annualizing the Monthly Realized Volatility Index, or multiplying it by the square root of (365/30), the number of 30-day periods in a year.

Hxro TIX and WIX Volatility Indices (.XBTCTIX) and (.XBTCWIX)

Hxro TIX Index (Average Move)

The TIX Index seeks to reflect the average close-to-close price movement for the last 12 and 26 periods of a given timeframe. The calculation utilizes exponential smoothing which places a heavier weighting on the most recent data.

Available in 1m, 5m, 15m, 1h, 1d timeframes.

TIX Index, 12 (12-period average move) (.XBTCTIX12)

TIX Index, 26 (26-period average move) (.XBTCTIX26)

TIX Simplified:

Assume the 5m .XBTCTIX12 Index is 12.72.

Based on the actual close-to-close price movement observed in the 5-minute periods of the XBTC Index, $12.72 is an indicator of the average close-to-close move (expressed in dollars and cents) of the 5-minute candle. The close-to-close move observed in a 5-minute candle can be visualized as the length of the “body” of the candle on a candlestick chart.

The TIX Index is another way of looking at price volatility across different time horizons. It can be used to help determine position sizing, entry and exit levels, placement of stop-loss orders, delta-hedging options positions, and much more.

Hxro WIX Index (Average Range)

The WIX Index seeks to indicate the average high-low price range for the last 12 and 26 periods of a given time frame. The calculation utilizes exponential smoothing which places a heavier weighting on the most recent data.

Available in 1m, 5m, 15m, 1h, 1d time frames.

WIX Index, 12 (12-period average range) (.XBTCWIX12)

WIX Index, 26 (26-period average range) (.XBTCWIX26)

WIX Simplified:

Assume the 5m XBTCWIX12 Index is 18.36.

Based on the actual range of price movement observed in the 5-minute periods of the XBTC Index, $18.36 is an indicator of the average range (expressed in dollars and cents) of the 5-minute candle. The range of price movement observed in a 5-minute candle can be visualized as the length of the candle on the chart including the candle shadows or “wicks.”

The WIX Index is another way of looking at price volatility across different time horizons. It can be used to help set position sizing, entry and exit levels, placement of stop-loss orders, delta-hedging options positions, and much more.

Exponential smoothing multiplier:

a = 2 / (n + 1)

For 12-period Index: a = 2 / (12+1) = 2/13 = 0.153846

For 26-period Index: a = 2 / (26+1) = 2/27 = 0.074074

Average Move Index = a*( Last Move) + (1-a)*(Previous Average Move)

Average Range Index = a*( Last Range) + (1-a)*(Previous Average Range)

Volatility Formulas

t = counter representing each 1-minute trading period

1440 = number of 1-minute trading periods in a 1-day time frame

Rt = continuously compounded returns as calculated by the formula:

Rt=LnPtPt-1

Ln = natural logarithm

Pt= settlement price of period t

Pt-1= settlement price of period before period t

t = counter representing each 1-minute trading period

10080 = number of 1-minute trading periods in a 7-day time frame

Rt = continuously compounded returns as calculated by the formula:

Rt=LnPtPt-1

Ln = natural logarithm

Pt= settlement price of period t

Pt-1= settlement price of period before period t

t = counter representing each 5-minute trading period

8640 = number of 5-minute trading periods in a 30-day time frame

Rt = continuously compounded returns as calculated by the formula:

Rt=LnPtPt-1

Ln = natural logarithm

Pt= settlement price of period t

Pt-1= settlement price of period before period t

We multiply the daily vol by the square root of 365 to convert into annualized terms, as there are 365 days in a year. 

We multiply the weekly vol by the square root of (365/7) to convert into annualized terms, as (365/7) represents the number of 7-day periods in a year.

We multiply the monthly vol by the square root of (365/30) to convert into annualized terms, as (365/30) represents the number of 30-day periods in a year.