Reading the VIX?

Discussion in 'Trading' started by AshanD, Mar 6, 2008.

  1. AshanD


    I'm trying to figure out how to read the VIX for interday signals.

    So someone tell me if this is accurate:

    -If the VIX is IN LINE with the size of the daily move, then these is NO SIGNAL

    -If the VIX is SIGNIFICANTLY LARGER than the daily move, than this means the markets are volatile and this is a NEXT DAY REVERSAL indicator.

    -If the VIX moves SIGNIFICANTLY LESS than the daily move, then this is a sign of PRICE CONTINUATION with recent price action.
  2. MTE


    Oh no, you blew the cover. Now everybody knows this and the "holy grail" is lost forever!

    On a more serious note, if it really was that simple then don't you think everybody would use that!? And even if it was, why would you want to broadcast it to the whole world or alternatively, why would anyone want to confirm this!?
  3. The Volatility Index reflects the Implied Volatility of the S&P options on the CBOE, both calls and puts. Often considered a measure of "sentiment" and a forecaster of expected volatility for the next month or so. In my opinion, to attempt to quantify this in too much detail is pretty futile. We use to predict volatilty, yes, but remember, it's not a "directional" indicator. You may, at times, see some correlation to market reversals, but I wouldn't put too much faith in that.

    "Pure" technicians may have a different explanation.


  4. AshanD


    It is an imperfect sentiment indicator (volatility) so I use it for what it is. I use many background indicators in addition to my TA. I remember there was a discussion on the VIX before that I can't find so I really don't see the need to keep this a secret.