VIX Cboe Index
The moment all American and European stock indexes are about to set new yearly highs (in some cases historic ones), the suspicion of their new and imminent collapse grows. The more they go up, the greater the propensity to bet on a future decline.
Is it a deductive logic that comes more from “gut feeling” than from technical factors, or does it have a scientific/fundamental basis to rely on?
Studying the numerous fundamental and macroeconomic analysis events is surely useful to comprehend the risk-on/risk-off dynamics.
The macro factors to analyze that can make markets unpredictable are many, some concatenated, some other surprisingly out of control:
- industrial production in the different continental areas
- gold reserves
- oil reserves and extraction
- commercial wars of great impact on the economy
- wars for conquering the monopoly of oil distribution
- and as recent history teaches us, even pandemics (Covid-19)
and then mass distractions:
- clandestine immigration (in the USA and in Europe)
- terrorist attacks
- balance sheet data of companies with earnings above/below estimates
What to do about volatility, and how to use them to earn with trading online?
The VIX Index
The VIX index is born from a mathematical formula that studies the implied volatility of call and put options on American stock indexes (S&P500) in the last 30 days. It is also known as the Fear Index. In fact, this index tends to rise when on American stock markets we see an increase in: volatility, trend instability and the danger of a possible return to a downtrend.
The VIX index is usually used to hedge long American stock positions.
The VIX index is listed since 1993 on CBOE (Chicago Board Options Exchange – see here) that determines its value with their own developed formula, and recently strengthened the control on its value with artificial intelligence in order to eliminate market anomalies that are due to some “suspect” manipulation of prices.
Trading with the VIX index
The VIX index is definitely one of the financial assets to always and only trade upwards, because in case of abrupt quote drops it tends to rise very rapidly. The VIX index can be utilized to do long trading, or to do hedging when trading the American stock market online.
It is important to remember that VIX quotes examine 30-day volatility of options on American indexes, so they have a strong short-term reactivity component.
How to buy & sell VIX
To trade the VIX, the Vix ETF (ticker symbol: VIXX) can be utilized, which is the most used by traders.
But there are other ETFs that replicate the VIX index in a similar way, as Competing ETFs (ticker symbols: VIIX, VIXM, VIXY, VXZ, XVZ).
For advanced traders there are other instruments like:
- VIX futures and mini-futures with monthy settlements by Cboe
- VIX options and mini-options
IMPORTANT: VIX price is with 2 decimals with this specifications:
- VIX future contract size is 1000 USD and 10 usd for each tick (0.01) and tick step of 0.05.
- VIX mini-future is 1/10 of future in contract size and tick value.
When to trade VIX?
You can choose to trade vix for different ideas:
- Porfolio hedging
- Risk premium yeld
- Long/Short volatility
Vix is an advanced instrument to use for short term trading because on the long term it will tend to be mean reverse to his avarage.
Normal Levels and Alert Levels for the VIX
Below the value of 25-30 points, the VIX index tends to visualize a stable market where there shouldn’t be imminent dangers of strong volatility (especially downwards). Above the said levels, on the contrary, there is the full danger of hardly predictable situations.
The recent history of 2020 has seen the VXXB plot prices even around 15 points, with a coincidence of maximums on the SP500 index.
After the collapse of the stock markets in March 2020, the VXXB touched levels of 70 and above.
Trading System with VIX and SP500
The We-Trading team has developed a trading system based on VIX volatility. The VIX trading system studies the relationship with SP500 and tries to identify some particular statistic combinations with the proprietary spread trading formulas developed through the We-Spread indicator.
As you can see the vix trading system work during the US market time with this specs:
- max 1 trade at day
- work on long and short side of sp500 index
- it wait for volatility to better performances (for example crash of sp500)
- working timing personalized
- work with all brokers that have vix instruments (CFDs or ETFs or Futures)
- work on metatrader 4 and metatrader 5 (soon also for cTrader, Tradingview, Prorealtime and Visual Trader – you can request other platform)
What you will receive
If you decide to buy this strategy you will have access to:
- indicators with trading signals
- trade manager to open positions just with one-click for manual or semi-automatic trading
- Expert Advisor to trade fully automated strategy
How you can access to the VIX trading strategy?
There are 2 ways:
- you can buy it for 299 eur (life time license for 1 real account + 1 month license for demo account)
- you can have it for FREE if you open a new real account with 1 of our partner brokers and you deposit at least 2000 usd