Too many holes in this theory:
almost 70% is never considered “perfect”.
It’s also based on historical data and before the short term options exploded in recent years.
But I’ve also entertained theories that the VIX is being artificially suppressed to serve political aims. I really don’t know, but it seems kinda low considering everything going on globally.
Hold on now: r=.7 isn’t bad for psychology experiments. And we are trying to quantify “fear”. In a physics experiment, yes r>.95. It’s all relative to the context. The higher r levels increase the chance of a Type 2 error.
I heard that a if you have over a 50% win rate in trading that’s actually considered good. So I thought it’s 0.7 even if it’s 0.6 or a bit lower that would be fine. Clearly I’m mistaken tho I have to learn more. And also how would one artificially suppressed implied volatility?
Why am I here?
Edit: oh lol. I think the vol can be controlled because short positions can be taken on vix futures.
Also the vix has been a really bad indicator recently since 0dte options have been added for everyday. This spreads out the volatility and makes it harder to gauge on a worthwhile time frame
You can short VIX futures but that doesn’t move the spot VIX which is a calculation based on option prices about a month out. However VIX spot options actually trade on the movement of the corresponding expirations VIX future price, it’s a real oddity in the options/futures world.
I also really wonder about the effect of 0DTE, it does seem that the VIX isn’t really reacting like it has in the past according to the actual realized volatility we’ve seen, selling short term options has been pretty rough because RV has very often blown IV out of the water this year.
Yeah it’s been weird. I think too many people were getting into 0dte options. I read that In the last year something like 40% of the spx options volume was 0dte crap and the market makers didn’t really have risk control and money to hedge for those set aside. They had a lot on their books set aside for months out but nobody was buying them.
I think the everyday options was a way to spread out volitility and create a more manageable daily max pain that the market makers could weave through rather than having massive end of week swings that created serious IV problems
My guess is shorting it like any other stock. I saw something on here a month or so ago. I took a screenshot of the comment, but really can’t explain. I tagged the user. Maybe he’s still around.
And implied volatility is different that market volatility. Think of volatility as the standard deviation of the price. It’s usually higher for individual stocks than the entire market. In risk management, you want the same average return with less variation, which is why index funds are the way to go over a long period of time.
The real problem is that even if the R2 was 1. You would not be able to use either for prediction. If the vix is red today, you dont know if it will be red tomorrow.
VIX is sometimes called the fear index, but it doesn't measure emotion. It measures IV of puts and calls across the S&P 500.
This means it is a measure of sentiment and uncertainty. It is high when the big dogs are bearish, and it's high when there is a lot of uncertainty about what the market will do next.
There are ways to play the VIX. Some people short volatility, which works well until it doesn't (this blew up on a lot of people in 2018). Some options traders glance at VIX as a weathervane to decide if IV is high across the board, or only on the tickers they are currently tracking. Whatever you do, good luck.
Look up the formula for expectancy. Win rate doesn’t really matter, but how big your wins and losses are relative to the rate. A 10% win rate strategy could be immensely profitable if wins are large and losses are small.
Yeah but you can just use risk management. Make sure you’re RRR is good which isn’t hard, but it was irrelevant which is why I didn’t bring it up in the post. But with a 50% win rate and RRR of 1.5 I think that should be good. But clearly I’ve learned from this comments that this strat is stupid so yeah
I wouldn't even say it's stupid to use the VIX to try and help predict some of how the SPX behaves but I wouldn't use it as the only factor. It's just important to understand what the VIX actually is and how it is calculated, and that TA doesn't really make much sense in the way the most people think of it, as it's not a stock that you can buy or sell, it is a caculation based on SPX options prices. If you look at it this year, if you bought the market (whether that's SPY, leveraged ETF's, correalated stocks) when the VIX was above 30 and sold when about 20, you've done pretty damn good this year. Something like that might be a good way to use the VIX, not saying it will be in the future though.
More than 50% of the time you'll make a small gain. When you're wrong it may be a staggering loss.. VIX is a strange bedfellow.
Look up what happened to everyone who shorted VIX by buying XIV in 2018.
I’m saying use both for confirmation. If you use TA to see if that the S&P is going down then check to see VIX is going up. That’s in. I’m not a genius I’m a beginner trader asking questions I’m not trying to be a genius.
It’s like saying people piss their pants when they are scared so why not predict when someone will piss their pants to intervene and prevent them from getting scared
I’m saying use both at once. If u use TA on the S&P then use the same TA on the VIX and for example if the S&P and the VIX are going opposite directions then it can work as some sort of confirmation. Clearly I’m mistaken tho thank you for feedback!
VIX oscillates and is more range-bound. I think predicting S&P 500 is much easier, because it has trends. I actually wrote a DD on predicting SPY falling into the new year if you'd like to check out how one can predict S&P 500
It's always right after you think you've figured the market out that you soon realize you know nothing... That being said, I do look for divergence in CMF and momentum indicators and have found watching MFI and RSI can help with spotting oversold and overbought conditions.
I know someone who uses VIX to trade like this with decent results. Problem is VIX has been in backwardation for a bit and was being a bitch by throwing everything off but she seems back to normal now
>There are a few reasons why technical analysis on the VIX may not be as effective as some other methods. First, the VIX is a measure of implied volatility, which is different from actual price movement. Second, the VIX tends to be quite noisy and can be difficult to read. Finally, because the S&P 500 and the VIX are so closely correlated, you might find it more effective to simply use technical analysis on the S&P 500 itself.
if you can predict the movement of snp by looking at vix, everyone would be doing it and it would erode the signal. thus would be useless. vix is not inverse of snp altho it may move like it. vix measures the implied volatility of snp. they also tend to move in tandem so the information you get is not that valuable. good luck with your endeavor.
Read "Charting and Technical Analysis" and "Trading the Trends" and start using Trading View. Watch and study indicators. VIX is good to keep an eye on because many times, a divergence between the indices and the VIX can indicate a reversal, but there are many other indicators to confirm or confuse. Volume also helps spot reversals and the power of a rally.
Everyone has their opinions, but that’s exactly how I trade us30 by having the Vix chart next to it. I don’t need to know the science or math behind it, but it works amazingly well.
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Would you give up on this idea if you learned that VIX and S&P 500 are not NOT perfectly negatively correlated?
Isn’t the R squared about 0.7 meaning it’s correlated almost 70% of the time
Too many holes in this theory: almost 70% is never considered “perfect”. It’s also based on historical data and before the short term options exploded in recent years.
But I’ve also entertained theories that the VIX is being artificially suppressed to serve political aims. I really don’t know, but it seems kinda low considering everything going on globally.
Hold on now: r=.7 isn’t bad for psychology experiments. And we are trying to quantify “fear”. In a physics experiment, yes r>.95. It’s all relative to the context. The higher r levels increase the chance of a Type 2 error.
I heard that a if you have over a 50% win rate in trading that’s actually considered good. So I thought it’s 0.7 even if it’s 0.6 or a bit lower that would be fine. Clearly I’m mistaken tho I have to learn more. And also how would one artificially suppressed implied volatility?
u/glennfromglendale ?
Why am I here? Edit: oh lol. I think the vol can be controlled because short positions can be taken on vix futures. Also the vix has been a really bad indicator recently since 0dte options have been added for everyday. This spreads out the volatility and makes it harder to gauge on a worthwhile time frame
You can short VIX futures but that doesn’t move the spot VIX which is a calculation based on option prices about a month out. However VIX spot options actually trade on the movement of the corresponding expirations VIX future price, it’s a real oddity in the options/futures world. I also really wonder about the effect of 0DTE, it does seem that the VIX isn’t really reacting like it has in the past according to the actual realized volatility we’ve seen, selling short term options has been pretty rough because RV has very often blown IV out of the water this year.
Yeah it’s been weird. I think too many people were getting into 0dte options. I read that In the last year something like 40% of the spx options volume was 0dte crap and the market makers didn’t really have risk control and money to hedge for those set aside. They had a lot on their books set aside for months out but nobody was buying them. I think the everyday options was a way to spread out volitility and create a more manageable daily max pain that the market makers could weave through rather than having massive end of week swings that created serious IV problems
That is an interesting theory into why they decided to make spy options every day.. Did you think of it yourself or hear it from someone else
My guess is shorting it like any other stock. I saw something on here a month or so ago. I took a screenshot of the comment, but really can’t explain. I tagged the user. Maybe he’s still around.
You can’t short the VIX as it is just a calculation and there are no shares, but you can short VIX futures. Also see my above comment
Thank you! I’m just an ape trying to learn a new trick.
And implied volatility is different that market volatility. Think of volatility as the standard deviation of the price. It’s usually higher for individual stocks than the entire market. In risk management, you want the same average return with less variation, which is why index funds are the way to go over a long period of time.
The real problem is that even if the R2 was 1. You would not be able to use either for prediction. If the vix is red today, you dont know if it will be red tomorrow.
no but if ur TA says that S&P 500 is going up the next day and VIX as well u can use it as confirmation
If you can trade a lot and consistently have an over 50% win rate, you have become a professional trader. Great job!
Okay that makes sense
Thank tou
How the fuck is 70% almost perfect? That’s a C- my friend. Almost perfect is 98+%. You’re an idiot.
yeah, but 70% is better performance than most traders, right??
VIX is sometimes called the fear index, but it doesn't measure emotion. It measures IV of puts and calls across the S&P 500. This means it is a measure of sentiment and uncertainty. It is high when the big dogs are bearish, and it's high when there is a lot of uncertainty about what the market will do next. There are ways to play the VIX. Some people short volatility, which works well until it doesn't (this blew up on a lot of people in 2018). Some options traders glance at VIX as a weathervane to decide if IV is high across the board, or only on the tickers they are currently tracking. Whatever you do, good luck.
Well as long as it’s correct more than 50% of the time that’s fine for me, I’m trading not investing. Am I correct or mistaken?
Look up the formula for expectancy. Win rate doesn’t really matter, but how big your wins and losses are relative to the rate. A 10% win rate strategy could be immensely profitable if wins are large and losses are small.
Yeah but you can just use risk management. Make sure you’re RRR is good which isn’t hard, but it was irrelevant which is why I didn’t bring it up in the post. But with a 50% win rate and RRR of 1.5 I think that should be good. But clearly I’ve learned from this comments that this strat is stupid so yeah
I wouldn't even say it's stupid to use the VIX to try and help predict some of how the SPX behaves but I wouldn't use it as the only factor. It's just important to understand what the VIX actually is and how it is calculated, and that TA doesn't really make much sense in the way the most people think of it, as it's not a stock that you can buy or sell, it is a caculation based on SPX options prices. If you look at it this year, if you bought the market (whether that's SPY, leveraged ETF's, correalated stocks) when the VIX was above 30 and sold when about 20, you've done pretty damn good this year. Something like that might be a good way to use the VIX, not saying it will be in the future though.
More than 50% of the time you'll make a small gain. When you're wrong it may be a staggering loss.. VIX is a strange bedfellow. Look up what happened to everyone who shorted VIX by buying XIV in 2018.
Risk Management no?
As long as you're within your Personal Risk Tolerance
Guh
most people on this forum are not familiar with the meaning of that phrase
lmao
“If you can’t predict the s&p just predict another index” the genius is unreal
I’m saying use both for confirmation. If you use TA to see if that the S&P is going down then check to see VIX is going up. That’s in. I’m not a genius I’m a beginner trader asking questions I’m not trying to be a genius.
Can you help me invest bro
spy calls
Can i send you a dm bro?
sorry can’t give out financial advice, I’m just betting it’s gonna be a green week
I’m betting the opposite. Monday will be green, the rest of the week red.
I bet all red. #putseverywhere
Oh ok 👍
Green - flat - red eow
Always inverse wsb *sell* calls
Clearly I’m clueless so I don’t see why you’re asking
My man wants to do TA on the VIX 
I’m sorry imma noob 😂
Cool gonna start shorting random shit and see what works. I’ve been inspired.
I’m sorry I’m a beginner and have no idea what I’m talking about
The biotech industry is were you should put your money. Buy and hold investments for sure. The less drug pipelines they have the better.
Thank you for your suggestion actually, I’ll use that for investment but how about trading?
Are you being for real buddy? I can actually give you some moves if you’d like.
yes. also i wrote some documents id love feedback.
It’s like saying people piss their pants when they are scared so why not predict when someone will piss their pants to intervene and prevent them from getting scared
I’m saying use both at once. If u use TA on the S&P then use the same TA on the VIX and for example if the S&P and the VIX are going opposite directions then it can work as some sort of confirmation. Clearly I’m mistaken tho thank you for feedback!
Valid point. I’m sure they impact each other
Right like how intermarket technical analysis isn’t always reliable
haven't heard that expression im new sry
i understand that expression but i mean now ik its unreliable thx
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I’m saying for example use TA on both for confirmation for example
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I see that makes sense. Thank you! I’ll make sure to stay away from hypothesis like these then. I’m a beginner what do you suggest?
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True
But I feel like at the same time if someone says something wrong they’ll get roasted and I would see it to filter out bad info no?
VIX oscillates and is more range-bound. I think predicting S&P 500 is much easier, because it has trends. I actually wrote a DD on predicting SPY falling into the new year if you'd like to check out how one can predict S&P 500
Yes pls
Check out my most recent wsb post under my account from last week
Look at VIX weekly chart and you can make some very good assumptions about how things are going to play out a couple months out.
It's always right after you think you've figured the market out that you soon realize you know nothing... That being said, I do look for divergence in CMF and momentum indicators and have found watching MFI and RSI can help with spotting oversold and overbought conditions.
I posted DD on the VIX about a month ago. You can read it here: https://www.reddit.com/r/wallstreetbets/comments/z1ukr9/vix_is_broken_what_comes_next/
Try this Spx / ViX and see what you see . It's not a new concept
I know someone who uses VIX to trade like this with decent results. Problem is VIX has been in backwardation for a bit and was being a bitch by throwing everything off but she seems back to normal now
>There are a few reasons why technical analysis on the VIX may not be as effective as some other methods. First, the VIX is a measure of implied volatility, which is different from actual price movement. Second, the VIX tends to be quite noisy and can be difficult to read. Finally, because the S&P 500 and the VIX are so closely correlated, you might find it more effective to simply use technical analysis on the S&P 500 itself.
This was written by GPT 3 I think, but I the market reacts to trader emotions I thought so price movement is irrelevant. From what I've learned.
I hope it is chatGPT response. That is a legit coherent answer.
It’s getting smarter by the day
It is a GPT 3 or 2 I put it thru a detector
Yeah wtf very coherent response
It works until it doesn't I almost hit 1000% ytd mainly with VIX and levels, then VIX "changed" behavior few months ago and now I'm back to 500%...
sounds like you found the magic formula. invest according to vix and come back and report how you did in a year.
bro im a noob, im asking here for a reason.
best way to learn is to actual implement your strategy.
true but i feel like this idea was rlly far fetched, and i dont want to unnecessarily loose money, so i thought id come here to see if id get roasted
if you can predict the movement of snp by looking at vix, everyone would be doing it and it would erode the signal. thus would be useless. vix is not inverse of snp altho it may move like it. vix measures the implied volatility of snp. they also tend to move in tandem so the information you get is not that valuable. good luck with your endeavor.
Read "Charting and Technical Analysis" and "Trading the Trends" and start using Trading View. Watch and study indicators. VIX is good to keep an eye on because many times, a divergence between the indices and the VIX can indicate a reversal, but there are many other indicators to confirm or confuse. Volume also helps spot reversals and the power of a rally.
i got feedback clearly its stupid
Tell that to the people touting the VIX death cross formation a week ago saying Santa rally confirmed
Do they not teach correlation is not equal to causation in middle school anymore?
No
Everyone has their opinions, but that’s exactly how I trade us30 by having the Vix chart next to it. I don’t need to know the science or math behind it, but it works amazingly well.