Monthly Bias Map
The VXN, or Nasdaq-100 Volatility Index, exhibits distinct monthly patterns that can serve as probabilistic priors for traders. As of July, with a historical average return of -0.52% and a win-rate of 33%, traders should be cautious of potential downside. Notably, January stands out as a month with significant positive bias, while November historically underperforms.
Best and Worst Months
January emerges as the most favorable month for VXN, with an average return of +8.60% and a win-rate of 76% based on 21 years of data. This surge can often be attributed to the increased volatility associated with the start of the new fiscal year. Market participants engage in rebalancing activities and position adjustments, contributing to heightened volatility.
In contrast, November typically sees the VXN decline with an average return of -7.36% and a notably low win-rate of 24%. This pattern may be influenced by the tendency for markets to stabilize towards year-end, as investors lock in gains and reduce exposure, resulting in decreased volatility.
Day-of-Week Tilts
While monthly seasonality provides a broad view, day-of-week patterns offer additional nuances. Historically, Mondays have been challenging for VXN, with an average return of -1.821% and a win-rate of only 26%. Similarly, Fridays and Wednesdays also show negative biases, with average returns of -1.152% and -0.878% respectively. These patterns suggest that traders might witness reduced volatility as the week progresses, possibly due to market positioning and news absorption over the weekend.
Where Seasonality Breaks
While seasonality can provide valuable insights, it is not infallible. Macro shocks, such as unexpected geopolitical events or significant economic policy shifts, can disrupt expected patterns. Additionally, changes in volatility regimes, such as those caused by shifts in monetary policy or technological advancements, can alter historical trends. Traders should remain vigilant and consider these factors when relying on seasonal data.
Where This Fits
Understanding VXN's seasonality is a crucial component of a trader's toolkit, but it should not be used in isolation. It serves as one of many inputs in a comprehensive trading strategy. For real-time updates and further analysis, visit the VXN live dashboard.