Vix and how it's misinterpreted
- Thread starter cdcaveman
- Start date
you elected Dubya twice-and he stole your future!
Check the facts- the US is much better off under Democrats-why is anyone a Republican?
ON IGNORE!
Someone has to pay taxes to fund the Democrat welfare state
So much retardation, so little time. The last Republican president who did anything was . . . Abraham Lincoln? Memory fails me. (And no, I'm not a Democrat, but I can at least recognize that Democrats and their supporters tend to be smarter than the average house pet. The same most certainly cannot be said of Republicans. Stupid rednecks + plus inherited old money = idiocracy.)
Here's the funny thing. Plot VIX on a chart. Then also lay a plot of a contrafund of the broader market, like TZA or SDS on the same graph. You'll see that VIX goes up when the market goes down. Like clockwork. I tried to make money on the differential, but it happens so quick I couldn't do it. My point is that (to me) the VIX is just a fancy way of measuring when the market goes down. It's so correlated to the opposite of market direction that it's almost indistinguishable. So an article that says "the market is going to turn up soon because the VIX is up" is saying the same thing as "the market is going to turn up soon because it is down". Stupid.
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I'd like to hear people weigh in on how they view the VIX used in a context of trading volatility. Useful? If so, how?
I personally think it's a great data point to use within a larger analytical framework of determining a vol forecast.
Thoughts?
I personally think it's a great data point to use within a larger analytical framework of determining a vol forecast.
Thoughts?
A narrow viewpoint: Looking at the IV percentile to gauge the option premium "relative volatility", is useful when deciding to enter specific trades, such as Iron Condors. Say, if 52 week IV percentile < 20% (pick your own comfortable number) , don't enter, as the credit will be low relative to the risk of Volatility increasing against your position. The idea, assumes the IV will be mean reverting, which may or may not occur in your timeframe. This seems logical and is touted by Tom on Tastytrade.
I don't trade a lot of condors, but depending on strike spacing and width wouldn't skew play a big part in the net premium you bring in as opposed to the level of vol?