Historical compression and implied slope as a futures regime map

Two clocks, one futures idea

This case maps a single index-futures idea onto two clocks. Historical-volatility is the timing barometer: a drop of short-window historical-volatility below a stated fraction of long-window historical-volatility is treated as a volatility-forecast that realized movement is about to expand. That condition is short-long-compression. Implied-volatility then casts a separate directional vote. The futures position is closed at reconvergence-exit.

Editorial reading: the two clocks are a market-regime map for putting that one trade in context, not a standalone call on the next price print.

Historical volatility as a timing barometer

The case treats short-long-compression as a forecast that realized movement is about to expand. Historical-volatility here is realized variability of the underlying over a chosen window. It is framed only as a timing barometer. It does not, by itself, identify the direction of the next move.

Implied volatility as a directional vote

Direction is taken from implied-volatility mean reversion. A short implied-volatility average above its long average is treated as a bullish vote. The opposite ranking is treated as a bearish vote. That ranking, read at the compression trigger, is implied-volatility-slope.

Implied-volatility was read from the nearby out-of-the-money call because that option typically had the highest volume in the sample.

Working windows and the trigger

The working specification used 90-minute and 180-minute historical-volatility windows, an 80 percent trigger on the longer window, and 75-minute and 165-minute implied-volatility averages.

If the longer historical-volatility window was not yet available after the open, the entry rule still waited for the short-window reading to meet 80 percent of the longer-window reading.

When the event ends

The case closed the futures position at reconvergence-exit: the point at which the short and long historical-volatility lines, or the short and long implied-volatility averages, meet again after the entry event.

Sample and neighboring choices

The design was examined on 30-second KOSPI 200 futures observations from November 2005 through December 2006. A 0.05-point slippage charge was subtracted from each simulated round trip.

Neighboring lookback combinations for the two historical-volatility windows and the two implied-volatility averages were compared in the same sample when selecting the 90, 180, 75, and 165 minute set. A threshold grid compared 100, 90, 80, 70, and 60 percent of the longer historical-volatility window as alternative expansion triggers.