VIX as an indicator.

TimtheEnchanter · Aug 28, 2020

So what your take on VIX as an indicator, in simple terms.

wrbtrader said:
Define when the VIX is high ?

To some its when the VIX hits 30...they then buy and get nailed for a big loss when the VIX climbs to 40.

To others its when the VIX hits 40...they then buy and get nailed for a big loss when the VIX climbs to 50.

and so and so on.

I saw a lot of traders blow up in March as the VIX rose quickly to pop above 80.

Best to use it as a mean reversion strategy instead of as a timing strategy via general statements like when the VIX is high...its time to buy.

wrbtrader
More...

They

tommcginnis said:
You would do well to ignore "Investopedia" as a source for trading or investment knowledge, as it is rife with inaccuracies, unsupported claims, and outright falsehoods. Taking just the quote above, "support" and "resistance" are terms intended to imbue collective market action with characteristics of individual traders. ((Side note: Though there is plenty of ecological fallacy in the contention (attributing a single goal from a massed and multivarious populace), it is something that Chicago School/Austrian School/Price Theory toys with, all the time. "Meh!")) The thing is, even granting great legitimacy to "support" and "resistance", they are terms that stem from market action, while the source of the VIX is thrice-removed from anything bought or traded as a good or service.

First, you have a market. Then, you have an option on that market, THEN you take partial-derivatives (delta, theta, rho), THEN you back out the volatility ("Vega!") implied by that option's price. And THAT only gets you to IMPLIED volatility, FOR A SINGLE OPTiON, at a single strike, for a single expiration. Now, repeat that over the announced strike&expiry universe, cook it all together, and you have the VIX. To imbue "support" or "resistance" to such a number is something so stupid that only "Investopedia" could be involved.

Best advice for your account balance: "Investipedia" -- Don't.
More...

Log in or Sign up

VIX as an indicator.

TimtheEnchanter