Does VIX really matter?

Discussion in 'Trading' started by increasenow, Sep 17, 2008.

  1. Does VIX really matter? got people saying, watch out taking ES shorts if VIX hits a certain high...your thoughts?...does VIX really matter or is it simply a responder to what people are doing in the cash SPX?meaning...the SPX drives and the VIX follows...kinda like Gold follows equities and never leads...
  2. 36.22

    Unchartered waters though.
    You make the call!
  3. It's a "lagging" indicator. The option expiration could produce some spectacular numbers. :eek:
  4. Unchartered? Did you trade in 2001-2002? It went over 40 on numerous occasions.

    I just found out VXO data is available starting in 1986. It usually has similar readings to the VIX. It peaked out at over 100 in 1987.

    I find the VIX much more helpful if you look at it on a relative basis, e.g., a short-term MA compared to long-term MA. It's even better if you combine it with the put-call ratio and price action. "Raw" VIX numbers aren't helpful in my book.

    As mentioned earlier, a panic VIX level was in the low to mid 40s in 2001-2002. From 2003-2006, it was more like 30 or even lower. It's all relative to average VIX readings over the last 3 to 6 months.

  5. lindq


    You'll understand the concept if you pull up a daily chart of the VIX, alongside a daily chart of the S&P.

    You'll note that over the past couple years, a spike in the VIX over 30 has corresponded to a temporary bottom in the S&P, followed by a tradable rally.

    The obvious point here being that it is not statistically a good time to be getting short when the VIX spikes.

    On timeframes shorter than daily bars, I've not found the VIX to be useful.
  6. Yahoo finance says the VIX reached 45 in 2002 and 1998.

    Anyone know how high it got in the 87 crash?
  7. From Startraitor's link in this thread:

    "While the level of 50 marks a normal VIX extreme in recent years, a contrarian speculation buy signal, there was one stunning event in history where the VIX actually exploded to almost unthinkable heights. On October 19th, 1987 the VIX rocketed up to close at the breathtaking level of 150! Merely one trading day earlier it had closed at 36, a normal level. Over the next five trading days, the VIX closed above the staggering level of 100 three more times.
  8. It matters because bloody IB raises margin requirements whenever it gets over 30 :(
  9. Duh, I've been trading since 1981.

    I'm all too aware of where the VIX has traded . . . I was a stock-index futures floor trader during the Crash of 1987.

    In my opinion, you can throw it out the window right now. It's value as an indicator is rather nebulous at best given the speed and volatility of our current market environment.

    It's not going to help you put on a winning trade.

    #10     Sep 17, 2008