An Empirical Study Of The SSE 50 ETF Volatility Index And Options Trading Strategies

The successful launch of the Shanghai SSE 50 ETF option on February 9,2015 marks the beginning of options’ era in China’s securities market.In the options trading market,volatility is the highest priority among all indicators.It can be said that the core of option trading is volatility trading.The study of volatility is also one of the most popular researches in the financial market.At the end of 2016,the SSE launched China’s first volatility index,the iVX Index.The creation of this index can help Chinese investors formulate strategies and avoid risks.The volatility index not only plays a role in the option market,but also plays an enormous role in the entire securities market.The U.S.VIX index uses the method of model-free implied volatility in its formulation principles.Because it is a successful model of the volatility index circle,this paper uses its characteristics to verify the function of China’s volatility index.The study found that in the irrational period,the function of the iVX index was poor.However,in the rational period,the function of the iVX index was effective.Next,this article validates the predictive power of the iVX index.This paper selects three most widely used models in the volatility forecasting model: the exponentially weighted moving average model,the GARCH model,the weighted BS implied volatility model and the model-free implied volatility model.The research results show that the model-free implicit volatility model is the model that contains the most information for future volatility,so the iVX index has the best forecasting ability.Because the options market is an emerging market,options trading is bound to be the hottest deal.Options trading generally profit from the direction of the target,volatility and time.This paper starts with the perspective of volatility,using the previous conclusions to build a strategy for options trading and it provides decision-making reference for investors.