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Volatility S&P 500 IndexVV

Volatility S&P 500 Index

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VIX trade ideas

Weekly Volatility SnapshotGood Evening -- Happy July 4th to everyone Let us review last week as we look towards the next in anticipation of the trade deal deadline that looms. I had a target on the SP:SPX of $6,253.59 and the weekly high was $6,284.65. The candle on the short week opened at its low of $6,019.21 and closed $6,233.08 making the weekly range +$213.87. This represents closest to HV63 over IV which stated +/-$253.26 and a 'strength of IV' that was 295% . Again the weekly high is above our range target, but my volatility will always be measured close-to-close. Now as we look towards this week -- IV (13.85%) has shifted upwards slightly with HV10 (7.36%) hinged down and still lowering. In fact, I have bi-weekly volatility as 97.28% 'coiled' to it's sliding yearly low of 4.64% -- HV21 (9.92%) is closer to what IV states with it being 'coiled' 96.61% to it's respective sliding yearly lows. In my opinion, volatility still has room to consolidate slightly as markets rotate higher. I think we can see upwards $6,327.73, but slowly over the course of the week with the last tariff uncertainty getting out of the way. From there, going into mid July we may need to see a volatility spike. The HV10 range I am watching holds a 'strength of IV' entering this week of only 53% -- this shows the price per move is expensive by almost twice as much. Till next time, know your ABCs, have a great long weekend, and stay hedge! CHEERS
CBOE:VIX
by splitmyIVandmelt
VIX Breakout: Forex Traders, Buckle Up for Volatility!🚨 VIX Surge: What Currency Traders Need to Know Right Now 🌪️💱 📊 Chart Context & Technicals: The recent breakout in the VIX signals a major shift in global risk sentiment! 📈 The index has leapt off its base, showing markets are bracing for uncertainty. For forex traders, this is a flashing signal: volatility in equities often spills over into FX, amplifying moves in major pairs and risk-sensitive crosses. ⚡️ 🌍 Geopolitical & Macro Backdrop: This VIX spike is fueled by President Trump’s aggressive new tariffs on BRICS-aligned nations. 🏛️🔥 These moves have reignited global trade war fears, rattled equity markets, and triggered a broad risk-off wave. Historically, VIX surges = sharp swings in USD, JPY, CHF, and commodity-linked currencies. The USD, usually a safe haven, is now under pressure from both trade uncertainty and looming Fed rate cuts as the U.S. economy slows. 🏦📉 💱 FX Market Implications: USD: The dollar is caught between safe-haven demand and worries over U.S. growth and deficits. Initial VIX spikes can boost USD, but ongoing trade tensions and dovish Fed signals are weighing it down. 💵⚖️ JPY & CHF: Classic safe-haven currencies! As VIX rises, expect flows into JPY and CHF, especially against high-beta currencies like AUD, NZD, and EM FX. 🗾🇨🇭 EUR, GBP, AUD, CAD: European currencies are outperforming in 2025, thanks to fiscal stimulus and capital inflows. Commodity currencies remain volatile, tracking risk appetite and global growth swings. 💶💷🇦🇺🇨🇦 🛠️ Trading & Strategy Takeaways: Volatility = Opportunity: Elevated VIX means wider ranges and more frequent breakouts in FX. Prime time for breakout and momentum strategies, but demands tighter risk controls and dynamic position sizing! 🚦 Watch Correlations: Rising VIX typically strengthens JPY and CHF, while risk currencies (AUD, NZD, EM FX) weaken. USD direction is more nuanced—initially bid, but vulnerable to U.S. policy missteps and data misses. 🔄 Event Risk: With Trump’s tariff policy in flux and central banks diverging, expect FX volatility to stay high. Stay nimble around news releases and be ready for headline-driven whipsaws! 📰⚡️ 🎯 Pro Takeaway: The VIX is flashing a clear warning for currency traders: risk sentiment is deteriorating, and volatility is back in force. This environment rewards disciplined, adaptive trading—favoring safe-haven currencies, tactical hedges, and a readiness to pivot as policy headlines evolve. For those trading USD/JPY, EUR/USD, and cross-rates, expect bigger intraday swings and more false breakouts. Use the VIX as your real-time risk barometer and adjust your strategies accordingly! 🧭
TVC:VIX
by fxtraderanthony
Weekly Volatility SnapshotGood Morning -- ☀️☀️☀️ What an amazing last full week of June that was as we pulled out of corrective territory and onto new ATHs with the SP:SPX body of its weekly candle moving +3.41% -- bottom to top. The weekly move open-to-close was +$98.40 as that is how I gauge my volatility metrics. This in comparison is closest in value to IV entering the week as it was stating an implied move of +/-$102.08, which was a volatility read of 16.34% -- As you see in reflection of the weekly chart below and within daily candle structure, price action moved upwards all week surpassing quarterly marks. This in turn is raising short-term volatility and lowering monthly averages as we rotate higher. Here is the weekly price action of the TVC:VIX from a 5m perspective. This is showing the EOW trend break upwards drilling the indices back down -- A healthy pullback after being seemingly over-extended. This happened during the news cycle release of the U.S. and Canada reciprocal tariff disagreement. Hopefully this settles over the weekend and we rotate higher into the 4th of July week. Now looking towards this holiday week -- We have the SP:SPX IV (13.29%) after melting during the ATHs move previously -3.09% -- This places IV on the sliding yearly spectrum at the 39% down range showing increasing discount in yearly value. Remember, If you form option positions IV affects VEGA 1% at a time and the algos bid down IV in contracting markets as they rotate higher. HV10 (12.46%) has hinged down and still is contractive per IV prediction but, increasing in comparison with a ' strength of IV ' now showing 94% entering this week. As the TVC:VIX has closed at $16.32 -- I believe that there is still a little room to extend potentially upwards to the HV10 weekly range of $6253.59. Currently, the SP:SPX YTD return is +4.96% with weekly momentum pointing up and room for volatility to still decrease. If this mark is reached it would put the YTD return at +6.52%. Very feasible and realistic being halfway through the year and going into the 4th of July 🇺🇸🇺🇸🇺🇸🇺🇸 Watch as we climb the wall of worries around us. This would in turn decrease short-term volatility more maybe even to a bottoming point and IV would melt during the rotation upwards with the VIX slowly grinding down. Come back next week as we review what happened within the implied ranges posted and overlook the volatility potentially bottoming and looking towards a VIX spike in the near future. Remember to know your ABCs and stay hedged against your bias! CHEERS!
CLong
by splitmyIVandmelt
2
Long Opportunity as VIX Signals Potential Upside Amidst Falling - Key Insights: The VIX remains subdued, suggesting prevailing bullish sentiment across equity markets. However, technical signals such as the falling wedge pattern indicate a potential breakout upward, highlighting latent market risks. Traders should consider taking a proactive long position to hedge against anticipated volatility spikes, especially if geopolitical risks or macroeconomic triggers re-emerge. - Price Targets: - Target 1 (T1): $17.85 - Target 2 (T2): $18.50 - Stop Level 1 (S1): $16.15 - Stop Level 2 (S2): $15.85 - Recent Performance: The VIX has steadily declined, breaking below psychological resistance levels like $20 and stabilizing in the current range of $15-$20. This reflects diminished market fear as equity indices continue to rise. Historically, periods of low VIX readings have often been followed by spikes driven by sudden risk-off sentiment. - Expert Analysis: Analysts agree that while the current VIX level indicates reduced fear, it may be giving investors a false sense of security. Technical analysis suggests that the formation of the falling wedge pattern could lead to upward price action, consistent with historical instances of a volatility surge. Market sentiment appears optimistic, but caution is warranted as the potential catalysts for a breakout remain unpredictable. - News Impact: The current market calm suggests no immediate shocks or surprises, but potential triggers such as central bank policy updates, inflation concerns, or geopolitical tensions could shift sentiment and amplify volatility. Traders should stay vigilant for macroeconomic data releases and earnings reports in the upcoming week that could act as catalysts for VIX movement.
TLong
by CrowdWisdomTrading
VIX Hits Key Level as S&P 500 Breaks Out – What’s Next?I keep a close eye on VIX levels that consistently matter — and one of those was just tagged: 📍 VIX levels I watch: 11.00 | 14.35 | 18.16 | 20.58 | 37.22 Today, we spiked up to 18.16 and stalled. This is my "in-between" level — not major, but notable — and we’re already seeing volatility slow right at that point. Meanwhile, the S&P 500 ( SP:SPX ) has broken out to fresh all-time highs. What I’m watching now: ➜ Will VIX stay below 20.58 and compress further? ➜ Does SPX hold the breakout into early July? ➜Could this set the tone for a melt-up summer? July’s first half is historically up and a mixed bag in the back half, but the price action and volatility narrative could give us the edge. July is the best month of Q3 traditionally (institutions). Stay focused on the close and the VIX response. #VIX #SP500 #SPX #volatility #macro #tradingview #DisciplineTrading
TLong
by disciplinetradingteam
VIX....nicely set-upVIX typically is not this low and the beauty of it is that it spikes 5-7 times a month about 5%. If you're in the lookout of a nice opportunity, this is nicely set-up atm. It may take a day or two to jump, but rallies typically have a pullback after a few good days. When profit taking hits, and it will come very soon, the VIX will spike again. You can use UVIX! It's the best ETF proxy IMHO if you understand how to use it. Always do your own due diligence and best of luck!
TLong
by antonini2002
Weekly Volatility SnapshotGood Morning -- I hope everyone had a good week of trading ranges -- although short, we saw some VOLATILITY . Here we will step back with the year-to-date TVC:VIX in the background as we look towards a fresh week trading within the broader market ranges. Let us begin -- Last week the S&P500 -- with the SP:SPX gapped up opening into strength of a short week at $6,007.46 and wicking up to $6,050.83 only to sell off during U.S. wartime engagement threats within the news cycle, closing the weeks range at $5,984.57. This provided a move of $96.96 and is most comparative to what IV (16.18%) stated entering last week -- that was predicting a range of +/- $101.24. Now, looking towards this week -- IV (16.34%) is nearly unchanged as HV10 (9.75%) is showing a 'strength of IV' lowering at only 60% currently. IV within the yearly spectrum sits with an IVp of 74% -- fairly expensive as this can show the majority of money is spending up to protect downside uncertainties. Understandable of course. Our long-term trending volatility of HV63 (30.25%) is showing a 'strength of IV' at 185% which is correlating to an implied move of +/- $188.98 for the week. This is an advantage if reached of $86.90 over stated IV. A massive premium capture potential. With the MACRO news cycle pointing EXTREMELY NEGATIVE, I will be watching for volatility expansion. I believe futures will open up gapping into quarterly marks -- this is just my humble opinion of course. I see the opposite of last week happening, where we gap down and run up into the week. I don't hold a swing position, just an observation that psychologically retail will flip bearish on wartime news with a massive gap down, only to get trapped as broader markets expand upwards into the week. That's all for now. Everyone have a good week trading ranges, and I will see you Saturday to review! As always, know you ABCs and stay hedged for whatever your bias may be! CHEERS
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by splitmyIVandmelt
4
JUN 24 - SPY VIX DXY GLD USO SPY (4H) Trend: Bullish Current price: 604.32 Active resistance block: 604.33 Channel: Rising, intact Key support: 581.99 📈 Break above 604.33 could trigger fast move toward 610+ 🔹 QQQ (4H) Price: 536.25 Resistance: 536.45 Support: 509.95 Volume: Building under resistance 📊 Breakout expected if 537 is cleared with volume 🔹 VIX (4H) Level: 13.89 Trend: Bearish Support: 11.60 🔻 Falling volatility supports continued upside in equities 🔹 BTC/USD (4H) Price: 105,244 Volatility: 10.14 Rebounding from: Block at 99,914 Institutional CALL flow at 106,512 (+19.3%) 🟢 If BTC holds above 104k, next target is 111,292 block 🔹 US10Y (4H) Price: 536.45 Testing: Channel resistance ⚠️ Watching for rejection at 540 or breakout toward 550 → Impacts tech sector positioning 🔹 GLD (4H) Price: 306.42 Support zone: 305.9 Institutional PUTs around strike 308 🔻 Bearish pressure remains; loss of 305 opens path to 291
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by alexpv73
Can Geopolitics Redefine Market Risk?The Cboe Volatility Index (VIX), which analysts widely dub the "fear gauge," currently commands significant attention in global financial markets. Its recent surge reflects profound uncertainty, particularly from escalating geopolitical tensions in the Middle East. While the VIX quantifies market expectations for future volatility, its current elevation signals more than mere sentiment. It represents a sophisticated repricing of systemic risk, capturing the implied probability of significant market dislocations. Investors find it an indispensable tool for navigating turbulent periods. The dramatic escalation of the Iran-Israel proxy conflict into a confrontation, involving the United States, directly fuels this heightened volatility. Israeli airstrikes on Iranian military and nuclear facilities on June 13, 2025, prompted swift Iranian retaliation. Subsequently, on June 22, the U.S. launched "Operation Midnight Hammer," conducting precision strikes on key Iranian nuclear sites. Iran's Foreign Minister immediately declared diplomacy over, holding the U.S. responsible for "dangerous consequences" and vowing further "punishment operations," including a potential closure of the Strait of Hormuz. This direct U.S. military intervention, particularly targeting nuclear facilities with specialized munitions, fundamentally alters the conflict's risk profile. It moves beyond proxy warfare into a confrontation with potentially existential implications for Iran. The explicit threat to close the Strait of Hormuz, a critical global chokepoint for oil supplies, creates immense uncertainty for energy markets and the broader global economy. While historical VIX spikes from geopolitical events often prove transient, the current situation's unique characteristics introduce a higher degree of systemic risk and unpredictability. The Cboe VVIX Index, measuring the VIX's expected volatility, has also risen to the higher end of its range, signaling deep market uncertainty about the future trajectory of risk itself. The current environment necessitates a shift from static portfolio management to a dynamic, adaptive approach. Investors must re-evaluate portfolio construction, considering long exposure to volatility through VIX instruments as a hedging mechanism, and increasing allocations to traditional safe havens like U.S. Treasuries and gold. The elevated VVIX implies that even the predictability of market volatility is compromised, demanding a multi-layered risk management strategy. This specific confluence of events might signify a departure from historical patterns of short-lived geopolitical market impacts, suggesting geopolitical risk could become a more ingrained and persistent factor in asset pricing. Vigilance and agile strategies are paramount for navigating this unpredictable landscape.
CLong
by UDIS_View
How to use $VIX as a Family Investor?VIX Zones for Family Investors (Fortnightly Review) 1. BTFD Zone (Buy the Fear Dip): • VIX above 22 • This is a buying opportunity. The higher the VIX, the greater the market fear—take advantage if you have capital available. 2. Cruise Control Zone: • VIX between 18 and 22 • Do nothing. No buying or selling—just stick to your routine and monitor the market. 3. Profit-Taking Zone: • VIX below 18 • Consider taking profits from higher-volatility stocks and reallocating to more defensive, large-cap stocks. This helps protect your gains in case of a sudden market drop.
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by Father3Jobs
1
Weekly Volatility Snapshot Good Evening -- Here we are again looking down the barrel of another week tracking the volatility within the broader markets! Let us begin -- Last week, the TVC:VIX was trending down as the S&P500 rotated upwards making it within 1.43% of highs, before selling off on war conflict news to end the week -- spiking the VIX again. We are now 114 days into the correction with uncertainty still being the only thing that is defined. However, it does seem that buyers are stepping in during these times of selling off. But, without lifting the uncertainty of trade deals and deadlines or negative news cycles, we could just be locking in a lower high and within another bear market phase. As we trend into the 2nd half of June, the SP:SPX has an IV (16.18%) entering the week trending 72% to it's yearly range suggesting slightly expensive premium. This is up from 52% IVp last week. Now in comparison to what is happening, HV10 (9.94%) is showing a lower volatility range than stated IV by -6.24%. This can be important when considering a premium disadvantage with a consolidating VIX under already expensive premium. The 'strength of IV' here is 61% -- and in turn my weighted implied ranges for the week are $5,914.78 - $6,039.16. If there happens to be a volatility spike this week due to anything out of the blue, we will find our range expanded to long-term trending means of quarterly values, that being HV63 (30.39%). This would create a 'strength of IV' of 188% and a massive spike in the VIX -- respectfully these weighted implied ranges would be $5,786.82 - $6,161.12. As always, I hope you enjoy the weekly write up and have a great week of trading ranges! Know you ABCs and REMEMBER stay hedged people. Till next week, CHEERS.
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by splitmyIVandmelt
VIX Trade Plan – May 23, 2025⚠️ VIX Trade Plan – May 23, 2025 📊 Instrument: VIX (Volatility Index) 🎯 Strategy: Long Exposure via Direct Shares 📈 Confidence: 70% 📅 Time Horizon: 3–4 Weeks 📌 Technical & Sentiment Snapshot Price @ Entry: $21.88 Chart Structure: • M30 / Daily: Bullish – above 10/50/200 EMAs • Weekly: Mixed, but showing upward bias • RSI: Neutral to slightly overbought • MACD: Bullish cross on intraday; flattening on higher timeframes Volatility Context: • VIX up +26.9% over 5 days • Backwardation in VIX futures • Elevated VIX/VVIX ratio hints at further fear pricing Headline Risk: • Geopolitical + macroeconomic uncertainty • Trade war tensions and surprise policy risk driving implied vol 🔽 TRADE RECOMMENDATION Parameter Value 🔀 Direction LONG 💵 Entry Price $21.88 🛑 Stop Loss $20.14 (–8%) 🎯 Target Price $25.62 (+17%) 🧮 Size 100 shares 🏦 Risk Level ~1.5% of account ⏰ Entry Timing Market Open 📆 Hold Time 3–4 weeks 🧠 Rationale Behind the Trade All 5 models agree on a moderately bullish short- to mid-term trend in VIX. Momentum is supported by: Rising geopolitical risks Backwardated futures curve Technical setups across intraday/daily charts Entry point near $21.88 gives strong R/R if VIX spikes toward $25–$27 range. ⚠️ Key Risks to Watch VIX Mean Reversion: VIX tends to drop quickly if risk subsides. Overbought Intraday: May cause short-term pullbacks even in a bullish context. Headline Dependency: Any peace deal, central bank surprise, or good news may instantly crush implied vol. Liquidity Spreads: Use limit orders on open — VIX ETPs (e.g., VXX, UVXY) can see wide bid/ask gaps. 🧾 TRADE_DETAILS (JSON) json Copy Edit { "instrument": "VIX", "direction": "long", "entry_price": 21.88, "stop_loss": 20.14, "take_profit": 25.62, "size": 100, "confidence": 0.70, "entry_timing": "open" } 💡 If VIX holds above $21.50 with momentum, this setup offers asymmetric upside. Stop placement near $20.14 helps protect against false breakouts or mean reversion traps.
TLong
by quantsignals
VIX June 2025 Monthly Support & Resistance Lines Valid till EOMOverview: These purple lines act as Support and resistance lines for VIX for the entire month of June, when the price moves into these lines from the bottom or the top direction. Based on the direction of the price movement, I will take long or short entries in QQQ or SPY. Trading Timeframes I usually use 30min candlesticks to swing trade options by holding 2-3 days max. Some can also use 3hr or 4hrs to do 2 weeks max swing trades for massive up or down movements. I post these 1st week of every month and they are valid till the end of the month.
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by OnePunchMan91
Weekly Volatility SnapshotVolatility, as measured by standard deviation, quantifies market elasticity and provides a level of probability and precision to trade within, that humbles us all. Last week, the TVC:VIX opened steadily dropping as markets rose into Thursday, (June 5th) where the broader markets drilled within the public drama of Elon Musk and President Trump. Talk about DRAMA -- Lay of the JUICE GUYs. On top of that -- Although there was progress, trade deals are still looming and uncertainty lingers. That day the volatility index closed spiking to $18.46, where it was to start the week -- only to once again have the dip bought right up and the index drops again to close the week at $16.44. We have now finished our first week of June with markets volatility still contracting as they grind higher. I expect the TVC:VIX to continue lowering softly as markets rotate to new highs this week. When this happens expect IV to lower within the move -- Unless we can see a news catalyst with any progress on trade deals, good or bad, we will see the same movement as last week with individual stocks being rotated. As we talked about last weekend, we saw NASDAQ:MSFT make a HUGE move! Entering this week HV10 (14.55%) has expanded above HV21 (13.97%) and IV (16.77%) has lowered to it's lowest value in the past year with IVp reaching 0%. Yet still above bi-weekly values. Looking towards next week, the SP:SPX with IV (13.56%) is still lowering as markets push higher while matching HV10 (13.11%) trending values. These bi-weekly values are of 97% strength of current IV. I believe we will see the target of $6082.71 with even a stretch to HV21 (15.69%) weighted to IV ranges showing potential of $6100.00 this week. As for our precious BTC funds, NASDAQ:IBIT and CBOE:BITX for 2x leverage, look for my upcoming weekly post on the current state of low IV and the potential expansion overhead to quarterly values. I do currently have open trades and providing transparency within my weekly analysis. See you back here next week! Same time same place.
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by splitmyIVandmelt
VIX Call Spread – Hedging Against Black Swan Risk (Aug ’25)📌 VIX Vertical Call Spread – Aug 19, 2025 (18/25) Executed on June 13, 2025 Volatility has compressed near multi-month lows, but the chart shows two major spikes above 45 in less than a year — triggered by macro shocks (Fed surprises, Trump’s “Liberation Day” tariffs, geopolitical escalations like Israel–Iran). I’m positioning with a long call spread on the VIX (Buy 18C / Sell 25C, exp. Aug 19), structured to hedge against a black swan while maintaining capital discipline. • Risk/Reward: 2:1 • Probability of Profit (POP): ~58% • Breakeven: ~21 • Defined risk / Defined reward • No directional delta risk I’m not forecasting volatility — I’m accepting that extreme events can (and do) happen. This spread pays off only if volatility spikes again above 21–22 in the next 60 days, which aligns with historical context. 🔒 No need to predict the trigger. Just manage exposure and define your risk upfront. 📈 Follow for more volatility and options setups based on structure + context. Let’s stay ahead, not reactive.
TLong
by fredcast80
2
VIX Call Trade Setup – Volatility Spike or Mean Reversion? (202⚡️ VIX Call Trade Setup – Volatility Spike or Mean Reversion? (2025-06-13) Ticker: TVC:VIX | Strategy: 🔼 Weekly CALL Option Bias: Moderately Bullish | Confidence: 65% Expiration: June 18, 2025 | Entry Timing: Market Open 🔍 Technical & Sentiment Snapshot • Current Level: ~20.96 • Short-Term Trend: Strong — Price above all EMAs (5m, 30m, Daily) • Momentum: MACD bullish, 5m RSI >90 (overbought) • Resistance Zone: $22.00 – $22.56 • Max Pain: $20.00 → potential magnet if reversal kicks in • Sector Sentiment: S&P downtrend + macro risk keeping VIX supported • OI Clusters:  – Puts: Heavy at $20.00  – Calls: Building interest at $22.00 and $23.00 🧠 AI Model Summary ✅ Grok + Gemini: • Bullish bias, expect continued upside • Favor calls: $22–$23 strikes • Trade VIX strength on S&P weakness ⚠️ Llama + DeepSeek: • Mean-reversion view → overbought conditions • Suggest puts at $20.00 for reversion to max pain 📊 Consensus: Moderately Bullish → Ride momentum with tight risk controls ✅ Recommended Trade Plan 🎯 Direction: CALL 📍 Strike: 22.00 📅 Expiry: June 18, 2025 (Weekly) 💵 Entry Price: $0.97 🎯 Profit Target: $1.45 (+50%) 🛑 Stop Loss: $0.73 (–25%) 📏 Size: 1 contract 📈 Confidence: 65% ⏰ Entry Timing: Market Open ⚠️ Risks & Considerations • RSI >90 → short-term pullback possible • $22.00 resistance could cap the move • VIX mean-reverting nature may drag it toward $20.00 • Equity stabilization (e.g. SPY bounce) = bearish for this call trade • Manage size — weekly VIX options are very volatile 🔥 Volatility trades are fast and furious. 📣 Will VIX explode higher… or revert hard back to $20? Drop your setup below 👇 📲 Follow for daily AI-backed trading plans + option signals.
TLong
by quantsignals
Trading the VIXOften dubbed the "fear index," the VIX gauges SPX options' implied volatility, typically rising during equity market declines and vice versa. It quantifies investor anxiety, demand for hedging, and market stress, crucial for traders and risk managers seeking to measure turbulence. The VIX calculates a constant 30-day implied volatility using SPX options expiring over the next two months. Unlike simple weighted averages of equity indices, its methodology is more complex, involving implied variance calculation for the two nearest monthly expirations across all strikes. For detailed formulas, refer to the introductory chart or visit the CBOE’s official VIX Index page. While the VIX Index itself isn’t tradable, exposure can be gained through VIX futures or exchange-traded products (ETPs) like VXX, UVXY, and SVXY. However, these instruments come with their own unique risks, pricing behaviors, and structural nuances, which can make directional VIX trading considerably more complex than it might initially appear. What You Need to Know About Implied Volatilities • In calm or uptrending markets, the volatility curve typically slopes upward (contango), indicating higher implied volatility with longer maturities. • In declining or turbulent markets, the curve can invert, sloping downward (backwardation), as shorter-term implied volatilities rise sharply. • This pattern can be observed, comparing VIX9D, VIX, and VIX3M against the SPX. In stable markets: VIX9D < VIX < VIX3M. In stressed markets, this relationship may reverse. The VIX9D and VIX3M are the 9-day respectively 3-month equivalent to the 30-day VIX. What You Need to Know About VIX Futures • When the volatility spot curve is in contango, the VIX futures curve will also slope upward. • In backwardation, the futures curve slopes downward, reflecting heightened short-term volatility and short-term volatility spikes. • While in contango, VIX futures "roll down the curve," meaning that—independent of changes in volatility—futures tend to decline in value over time. • In backwardation, the opposite occurs: futures "roll up the curve," potentially rising in value over time even without volatility changes. • VIX futures’ responsiveness to VIX Index movements – the beta of VIX futures against the VIX index - declines with longer expirations; front-month futures may react to 70-80% of VIX changes, compared to 40-60% for third or fourth-month futures. Key Consequences for Traders • Directional trading of VIX futures can be strongly influenced by the shape of the futures curve. • Contango in low-VIX environments creates strong headwinds for long VIX futures positions, caused by the “roll-down-effect”. • Conversely, backwardation in high-VIX environments creates headwinds for short positions. • These effects are more pronounced in front-month contracts, making timing (entry and exit) for directional trades critical. • There's a trade-off in directional strategies: front-month futures offer greater exposure to VIX movements but suffer more from negative roll effects. How to Trade VIX Futures • Due to these structural challenges, directional VIX futures trading is difficult and requires precision. • A more effective approach is to trade changes in the shape of the futures curve using calendar spreads (e.g., long VX1, short VX2). This reduces the impact of roll effects on individual contracts. • In low-VIX, contango conditions, a rising VIX typically leads to VX1 increasing faster than VX2, widening the VX1–VX2 spread—an opportunity for spread trading. • While VX1 may initially suffer more from roll-down than VX2, this can reverse as the VIX rises and VX1 begins to “roll up,” especially when VIX > VX1 but VX1 < VX2. • The opposite dynamic applies in high-VIX, backwardation environments. • More broadly, changes in the shape of the futures curve across the first 6–8 months can be profitably traded using calendar spreads. Roll-effects and the declining beta-curve can also be efficiently traded. How to capture the Roll-Down-Effect One of the more popular VIX-trading strategies involves capturing the roll-down effect,, while the curve is in contango. It is a positive carry strategy that is best applied during calm or uptrending market conditions. Here’s a straightforward set of guidelines to implement the Roll-Down-Carry trade: • Entry Condition: Initiate during calm market conditions, ideally when VIX9D-index is below VIX-index (though not guaranteed). • Choosing Futures: Use VX1 and VX2 for calendar spreads if VX1 has more than 8-10 trading days left; otherwise, consider VX2 and VX3. • Spread Analysis: Short VX1 and long VX2 if VX1–VIX spread is larger than VX2–VX1; otherwise, VX2 and VX3 may be suitable. • Contango Effect: VX1’s roll-down effect typically outweighs VX2’s during contango. • Relative Beta: VX1 shows higher reactivity to VIX changes compared to VX2, mimicking a slight short position on VIX. • Exit Strategy: Use spread values, take-profit (TP), and stop-loss (SL); consider exiting if VIX9D crosses over VIX. ________________________________________ Conclusion Directional trading of the VIX Index—typically through futures—demands precise timing and a good understanding of the volatility curve. This is because curve dynamics such as contango and backwardation can create significant headwinds or tailwinds, often working against a trader’s position regardless of the VIX’s actual movement. As a result, purely directional trades are not only difficult to time but also structurally disadvantaged in many market environments. A more strategic and sustainable approach is to trade calendar spreads, which involves taking offsetting positions in VIX futures of different maturities. This method helps neutralize the impact of the curve's overall slope and focuses instead on relative changes between expirations. While it doesn’t eliminate all risk, calendar spread trading significantly reduces the drag from roll effects and still offers numerous opportunities to profit from shifts in market sentiment, volatility expectations, and changes in the shape of the futures curve. What else can be done with VIX instruments VIX indices across different maturities (VIX9D, VIX, VIX3M), along with VIX futures, offer valuable insights and potential entry signals for trading SPX or SPX options. In Part 2 of the Trading the VIX series, we’ll explore how to use these tools—along with VIX-based ETPs—for structured trading strategies.
CEducation
by parsifaltrading