MOVE (Merrill Lynch Option Volatility Estimate) Index

How to use it in trades?

The Merrill Lynch Option Volatility Estimate (MOVE) Index is a measure of expected volatility in the U.S. Treasury bond market.

Investors and analysts use the MOVE Index to gauge potential volatility in interest rates and bond prices, which can have significant implications for various financial markets and investment strategies.

It was introduced by Harley Bassman of Merrill Lynch in 1994 and is often referred to as the "VIX for bonds".

Key features of the MOVE Index include:

Calculation: It uses a yield curve weighted index of normalized implied volatility on 1-month Treasury option.

Components: The index tracks options on 2-year, 5-year, 10-year, and 30-year U.S. Treasuries.

Time frame: It reflects market expectations for volatility over the next 30 days.

Interpretation:

• High Values:

A high MOVE index indicates increased volatility in the Treasury market, often signaling heightened uncertainty or risk. This can suggest expectations of significant changes in interest rates or economic inst…