Therefore I've added a new chart to the bottom of the VIX Futures Data page to track 1 and 3 month historical volatility (HV21 and HV63) of the S&P 500 against 30-day forward implied volatility (VIX) and front month VIX futures (M1).
In the graph I've chosen the actual volatility of the S&P 500 over the past 30 days (HV21) and tracked it against the 30 day implied (forward) volatility, a common measure of the volatility risk premium.
However, I find HV21 to be a bit too noisy so I will often look at HV63 vs VIX instead since the two are more tightly coupled with a smaller average difference and smaller standard deviation. I find it helpful to use HV63 as a rough approximation for a lower bounds of VIX in the immediate future under most conditions. The exception here is that HV63 will lag quite a bit and be higher than VIX after after large volatility spikes.
As for establishing an upper bounds, HV does not take into account future event risk and therefore is not useful in predicting how high volatility might go. This is demonstrated in the graph in late December as the VIX rose on concerns about the Fiscal Cliff while HV stayed quite low. After the event risk had passed when the deal was made on Jan 1, forward implied volatility fell back in line with HV.
I've included front month futures (M1). Since I focus on trading VIX Futures ETFs I care much more about this value than the actual VIX. Specifically I look at the premium of M1 over VIX to help determine if VIX futures are relatively cheap or expensive. Of course I also look at all months of VIX futures but I already have a graph dedicated to tracking those prices.
The actual values of these metrics can be found in the Quotes box on the VIX Futures Data page.
