SAVI Top 40
The South African Volatility Index (SAVI) Top 40 is a forecast of Equity Market risk in South Africa. It is modelled on the VIX, a popular measure for the volatility of the S&P 500. The SAVI Top 40 enables investors to gauge fear and market sentiment relating to the local Equity Market. In essence, the SAVI constructs a forward-looking index that provides a daily prediction of market volatility in three months’ time. It is calculated using implied volatilities obtained daily from specific Top 40 options.
Who should use this?
The index itself is not a tradable product; it is a transparent indicator of market sentiment.
Market commentators, economists, traders and investors interested in identifying market patterns can refer to the SAVI Top 40. Those interested in taking a direct view on volatility can trade variance futures accessed through an Equity Derivatives member.
- A tool to measure market sentiment.
- Users can monitor fear forecasts daily.
- Users can estimate how far prices are expected to move in a given time frame.
- It includes all the dimensions of volatility.
- It can be used as an asset class by trading in a variance future.
- The index itself is a theoretical forward and is not based entirely on historic values, so it is not infallible and should be used for reference purposes only.
- Market participants should bear in mind that, when volatility is low, there is a measure of complacency in the markets (or a lack of fear). In a high volatility environment, large market moves are possible.
- Investors who decide to use variance futures should bear in mind that using futures is potentially a high risk strategy. Private investors can lessen the risks of trading by ensuring they have a high degree of product knowledge. Private investors should also always invest within their means and deal with experienced brokers.