friday trading, page-255

Sarala / Noomx

here's how that Vix calc works:-

Vix at 50 and S and P at 900

50% / sqrt (12) = 14.43%

14.43% * 900 = 129.9

900 - 129.9 = 730

900 + 129.9 = 1030

http://en.wikipedia.org/wiki/VIX

Thats the maths / stats behind the statement that there is a 68% chance of the S and P being between 730 and 1030.

(Note this statement assumes returns are normally distributed, a possibly dangerous assumption.)