Interesting volatility measurement

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Long time ago I stumbled across interesting volatility measurement at

The idea is following: take 3-day historical volatility of S&P 500 index and divide that by 10-day historical volatility. Then mark all points which are less that 0.25 and measure the volatility of 3 following days. On average, the volatility of following 3 days will be 5 times higher.

?View Code RSPLUS

print('all days:')
print('days, then past volatility < 0.25:')

I was tweaking the result to squeeze some profit, but not so much luck. Basically, you need to trade either VIX index derivatives or S&P 500 index options to get direct impact. Before doing that, you need to test historical performance. Unfortunately, I don’t have data for these instruments. What about ETF, like VXX? Nope, because only few data points in the testing sample.

Later, I will try to incorporate GARCH model to see if this going to help. Any fresh ideas on this?

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