Vix and more...

Last days of volatility compression. Vix set for some decisive breakout in a day or two.. keep in mind the monthly and financial year closing on wednesday

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Much of the action is bound to happen in April. Volatility needs to pick up. Index trading at historical low volatility levels is never a good sign. Atleast history tells us this.

Tc.

I understand the logic of low Vix, absence of fear, sign of increasing in VIX etc. But fail to understand the logic behind various trendlines drawn on VIX chart.

Would appreciate if you can throw some light on why these TLs shd work on VIX chart, why would vix find support there and jump. If you have any link on this for further study, then plz share.

In my understanding if VIX, "low vix relates to mkt top" looks perfect on left side on chart but VIX can remain LOW for long time.. hence it is difficult to pin-point market reversal with VIX.

Having said that, it certainly indicates to me as option trader that it is time to trade volatility increase and buy options that are undervalued (even May series is going really cheap).

Happy Trading

Vix breaks out.. Let's see if it sustains or not..



very apt presentation of situation Raunak and AW10 sir

AW10 sir, I have not been able to find any specific documentation on trendline analysis on Vix... but if you search for "trendline analysis vix" on google then there are many results which have based their analysis on trendline analysis.

However as Vix is basically a weighted sum of option prices and pricing can be analysed with trendlines, thus Vix should be a valid case for trendline analysis. Please correct me if you think otherwise.

Not much change.. is there a news lurking somewhere - my wishful thinking

VIX can remain low for long time. But it is certainly indicating to excercise caution. Friday and Monday is Easter/Good Friday holiday preiod in western market so quite possible there may not be any action in next 1 or 2 days.

In US mkt, there are instrument (etf, VIX options etc) to trade VIX directly. That means VIX chart is used by traders who trade in those intruments.
Hence quite possible, that some of TA rules might work there.

But NIFTY VIX is not traded directly. In my view, option price depends on 5 variables hence TA rules may not be applicable directly (eg. - If 5300 CALL option was traded at 100 rs yesterday when mkt was 5310 but 2 days later when mkt again comes to 5310, this CALL may not be trading at 100. Time decay, change in volatility, risk perception in market etc would have changed. So when nifty can still support from 5310 level, 5300 call may not find support at 100). And VIX makes the calculation to few more extra levels away from underlying's price. So further u go from the originating source of signal, analysis is prone to more error. (compare the case to - listening to music with earphone plugged in ear and when earphone is 2 meters away hidden somewhere in the bed).

Personally, I have not done analysis on it, but certainly topic worth further investigation.
My guess is, reading high VIX will be easier then reading low vix. Cause high vix results in high stress in all human being involved with mkt - trader, media, investor, govt, politicians etc.. And we all have certain tolerance level to pain. But that is not the case with pleasure (ie. low vix).. None of us will say no to pleasure. That is one of the reason that bull markets lasts longer then bear market.

Just some of my thoughts on this topic.
Happy Trading

Vix candlestick chart.. rangebound for several months

Vix below its 5DMA and 20 DMA. However 5 DMA looking to crossover 20 DMA

Vix still making moves inside the trendlines...some decisive move is expected in coming days.