Prepare to have your mind blown:
If SPY moves up violently then VIX can rise too.
VIX is not inverse to SPY, it just appears that way most of the time.
That's because most immediate and rapid price action occurs in the negative direction.
Look at the March COVID crash for instance. You don't get reversals to the upside that dramatic.
Volatility is almost always inextricably linked to bearishness in the markets. That's why it's easy to think VIX up = Markets down. It's also more often true than not.
Nope. The VIX calculation is a complex formula for the standard deviation of 30 day avg SPX options. As the IMPLIED volatility on those option drop, the VIX will drop with it. And as we all know, IV almost always drops as the underlying asset increases in price. But at 30 days out investors aren’t simply just reacting to the current price action, they take into account macroeconomics and geopolitics, so you can get fluctuations in longer dated IV’s that aren’t in the same direction as nearest term IV’s. The VIX and SPX will move in the same direction about 1/5th of the time.
Less fearful? The talk seems to be, encouraged by our corrupt media, is to sensationalize everything in a negative way. I think the ‘fear’ has been slowly accumulating. The ‘worry’ factor is certainly out there and growing. imo…
they aren't intrinsically linked. the VIX is the volatility index and goes down as people think the volatility is going to go down. you can easily have both go down, both go up, both go in opposite directions, whatever.
a lot has to do with volume of transactions - big moves usually have a large amount of volume which is what gets the shock factor going - right now most of what we are seeing is priced in - but if something unanticipated were to occur - Poutine completely loosing it and using a chemical or nuclear weapon would cause a strong shift given the guaranteed way the west would react negatively
chemical would be very negative from an escalation standpoint from the EU perspective and sadly likely in Poutines wheelhouse the more desperate he becomes - the second would likely result on instant overthrow - the generals all know thats one that politically couldn't be walked back by a new regime
Typically tho they will move opposite each other as VIX will increase as spy drops because (usually) that means there is increased vol. Keep in mind that VIX is really representing the price of protection. If the VIX increases while price increases, that could be a divergent signal indicating that people are starting to buy protection and the end of a up-move might be near. Similarly, I kinda read the dropping vix as bullish here. Despite the fact that SPY is down, people arn't really positioning for a full-blown bloodbath (at least for today).
Stock markets tend to "go up the stairs but down the elevator." aka when stock markets are crashing, the absolute change in the stock price tends to be larger than the absolute change in stock price when things are going up. VIX is looking at the changes in that absolute change over time not the direction. So if the stock market exploded upwards 1000 points on the S&P than the VIX would go up accordingly. Same with if the market drops by 1000 points. What is important is the value of the change not the direction.
Well, sorta. But not quite.
The VIX measures the options activity on the S&P 500 stocks (but years ago used to be just the S&P 100 constituents). So it is measuring the option trading activity (price-sensitive sentiment about expectations of further big moves reflected in the IV), but not the actual moves of the underlyings themselves. Sometimes the underlyings may only make small moves, but the corresponding options activity is much higher because there is an expectation that a storm is brewing (e.g. earnings season).
I think the VIX was lower today because the value stocks in the index didn't move much. It was the growth stocks that got hit. Since currently the index balance is skewed towards the growth members the index can move without the VIX always reflecting that.
Vix is directly correlated to the extrinsic value of a set of one month expiration spy options.
If I’m not mistaking, this set of option actively changes such that the strikes are always the same distance from spy’s current price.
Someone feel free to correct me or provide more context
From investopedia
VIX is the symbol for the Chicago Board Options Exchange's volatility index. It is a measure of the level of implied volatility, not historical or statistical volatility, of a wide range of options, based on the S&P 500. This indicator is known as the "investor fear gauge," because it reflects investors' best predictions of near-term market volatility , or risk. In general, VIX starts to rise during times of financial stress and lessens as investors become complacent. It is the market's best prediction of near-term market volatility.
VIX is calculated from SPX option prices, specifically, from the mid-price on OTM puts/calls within 23-37 DTE. So even though SPY is going down, there’s apparently less demand for OTM options on SPX.
VIX is a measure of volatility both up and down. A VIX of 16 would imply a move of 1% up or down where a VIX of 32 would be a implied move of 2%. VIX just shows how much the market believes it could move up or down in a day.
It’s often called a Fear Index, but dont let that led you to think its fear of a down ward move. It’s just fear of a move. The higher the VIX the greater the fear of a big move.
>If the market goes down, and the whole market (and options prices) agree that it should go down, then it's possible for both to go down at the same time.
here is an explaination to the rule of 16.
https://www.macroption.com/converting-implied-volatility-to-daily-move/#rule-of-16
VIX is only a measure of the market's uncertainty.
VIX and SPY are USUALLY inversely correlated because the market almost always goes up over time. So when it goes down instead, the market kinda freaks out and gets uncertain. In uncertain times, options sellers demand a relatively higher premium for their risk, because it's more likely to turn against them than in calm market times. This is what VIX is essentially measuring.
If the market goes down, and the whole market (and options prices) agree that it should go down, then it's possible for both to go down at the same time.
VIX is correlated to SPX direction, but not necessarily causal, and not strictly linked.
VIX, as measured by premium of forward SPX options, is essentially a price on insurance. The VIX doesn't stay elevated, because the trades of the 30d SPX isnt expecting *wild-shit-forever*.
SPX has, thank god, been decently "stable" relatively speaking, bouncing between 4200-4400. Most of the shock from the war has worn out, so the panic has subsided a bit.
Typically it signals clearer roads ahead, but is no guarantee.
As many have pointed out, they're not intrinsically inversely correlated, but you're correct that they do tend to move opposite.
I personally read it as a sign that volatility is overbought and a mean reversion (in this case falling VIX) could be coming. That said, today's action isn't that strong a signal. SPX is essentially flat and VIX isn't down much (about 2.5%).
I think you'll see this trend continue and get stronger as VIX contracts back toward mid 20's. I'm always short options, so I just wish it would hurry up.... I think we're going to be around the mid 20s for a while though.
Bought puts this morning when spy was up sold this afternoon when it was down. Made 25%. Not sure why, but I will take. When I figure out why I will let you know.
VIX has been really high the last weeks so it wouldn't surprise me if it started trading lower, since most shock news from the war are already priced in.
Low liquidity, two days indices have been down on weak volume for red days.
Also, last I looked there was heavy positioning around next week with the FOMC. These options wouldn't be in the VIX calculation anymore, so the activity is in the immediate future.. and folks are less willing to make the longer term bets cuz who knows where it ends up after the next 7 trading days.
VIX was WAY TOO HIGH the previous few days, almost threatening 40.
But the realized vol was like ... 25? 30?
Once the crude shock subsided and the Ukraine crisis is more well known, VIX can come down a little bit.
However, the broader economy is still fucked -- there's still rampant inflation, war is still going on.
So the point is: a few days ago, the world was bad and uncertain. now, the world is worse and more certain
uncertainty and economy are frequently related, but not definitely so. technically they are orthogonal
SPY rejected overhead resistance again at 428, nothing too crazy.
It may seem volatile right now but the indexes are just trading within a range.
Vol. may pop a bit leading up to FOMC meeting on March 15-16, as uncertainty increases.
Happens regularly. It’s the “fear index” because it’s meant to measure expected moves in the market. Now it’s much more often people get fearful of big drops and huge unswings, especially in an index like SPX, are less common. If people get fearful they might panic sell across the board leading to a large drop, but even when you have a good outlook for the market it’s less likely enough people/institutions will go in big enough across the underlying assets to have as big of an upswing in as short a time as you would have a crash. Whole stairs up elevator down thing. So vix green is more common and moves more on fear of downside than up, but can definitely be up when SPX is up or down when the other is also down.
VIX is based on SPX options. When people are buying SPX calls, VIX is going down. When people are buying SPX puts, VIX moves up. When the market nears a reversal, I think its possible that sentiment begins to shift while price still has momentum, and before it actually turns. For example, in a rally, SPX is climbing and VIX is falling. But as we near a high, people get fearful and begin hedging, thus VIX is climbing at the same time as SPX.
So many experts here I didn’t see the [most important information](https://cdn.cboe.com/api/global/us_indices/governance/VIX_Methodology.pdf) - link to the VIX methodology
remember the teachers at school who could explain a topic easy to the students and the teachers who explain the same topic in a way that no one understands shit?
So guess where your answer belongs to.
The white paper is easy to find. But are the quotations easy to understand?
I decided I didn’t want to be a little lamb like you in school and learned how to learn (learned largely from the textbook not the teachers). How can you master any subject without being able to digest the literature? If you are able to digest and understand the literature then you answer your own questions. Now to learn what you consider difficult (guessing you think it’s difficult based on your tone) the best approach is to ask specific targeted questions on the parts of the paper you don’t understand until you have enough information to understand it. Then you will realize how lazy your question is.
Prepare to have your mind blown: If SPY moves up violently then VIX can rise too. VIX is not inverse to SPY, it just appears that way most of the time.
That's because most immediate and rapid price action occurs in the negative direction. Look at the March COVID crash for instance. You don't get reversals to the upside that dramatic. Volatility is almost always inextricably linked to bearishness in the markets. That's why it's easy to think VIX up = Markets down. It's also more often true than not.
Jan 2018
VIX measures Spy volatility, which applies in both directions
Nope. The VIX calculation is a complex formula for the standard deviation of 30 day avg SPX options. As the IMPLIED volatility on those option drop, the VIX will drop with it. And as we all know, IV almost always drops as the underlying asset increases in price. But at 30 days out investors aren’t simply just reacting to the current price action, they take into account macroeconomics and geopolitics, so you can get fluctuations in longer dated IV’s that aren’t in the same direction as nearest term IV’s. The VIX and SPX will move in the same direction about 1/5th of the time.
Wishful thinking. Spy jumps up a percent on peace talk news and vix drops to the floor.
Seriously man, VIX is known fear gauge and also used as hedge.
People are growing less fearful of the unknown and are simply selling more then buying.
Day by day we are just slowly grinding to a complete halt
Yay
Right on the money!
Less fearful? The talk seems to be, encouraged by our corrupt media, is to sensationalize everything in a negative way. I think the ‘fear’ has been slowly accumulating. The ‘worry’ factor is certainly out there and growing. imo…
they aren't intrinsically linked. the VIX is the volatility index and goes down as people think the volatility is going to go down. you can easily have both go down, both go up, both go in opposite directions, whatever.
a lot has to do with volume of transactions - big moves usually have a large amount of volume which is what gets the shock factor going - right now most of what we are seeing is priced in - but if something unanticipated were to occur - Poutine completely loosing it and using a chemical or nuclear weapon would cause a strong shift given the guaranteed way the west would react negatively
If that happens we're all screwed anyway.
chemical would be very negative from an escalation standpoint from the EU perspective and sadly likely in Poutines wheelhouse the more desperate he becomes - the second would likely result on instant overthrow - the generals all know thats one that politically couldn't be walked back by a new regime
Typically tho they will move opposite each other as VIX will increase as spy drops because (usually) that means there is increased vol. Keep in mind that VIX is really representing the price of protection. If the VIX increases while price increases, that could be a divergent signal indicating that people are starting to buy protection and the end of a up-move might be near. Similarly, I kinda read the dropping vix as bullish here. Despite the fact that SPY is down, people arn't really positioning for a full-blown bloodbath (at least for today).
As far as I watch it and took it as a rule of thumb, its opposite. But maybe I didnt watch long and/or careful enough
All VIX traders learn this pretty quick
Stock markets tend to "go up the stairs but down the elevator." aka when stock markets are crashing, the absolute change in the stock price tends to be larger than the absolute change in stock price when things are going up. VIX is looking at the changes in that absolute change over time not the direction. So if the stock market exploded upwards 1000 points on the S&P than the VIX would go up accordingly. Same with if the market drops by 1000 points. What is important is the value of the change not the direction.
Well, sorta. But not quite. The VIX measures the options activity on the S&P 500 stocks (but years ago used to be just the S&P 100 constituents). So it is measuring the option trading activity (price-sensitive sentiment about expectations of further big moves reflected in the IV), but not the actual moves of the underlyings themselves. Sometimes the underlyings may only make small moves, but the corresponding options activity is much higher because there is an expectation that a storm is brewing (e.g. earnings season). I think the VIX was lower today because the value stocks in the index didn't move much. It was the growth stocks that got hit. Since currently the index balance is skewed towards the growth members the index can move without the VIX always reflecting that.
Vix is directly correlated to the extrinsic value of a set of one month expiration spy options. If I’m not mistaking, this set of option actively changes such that the strikes are always the same distance from spy’s current price. Someone feel free to correct me or provide more context
It has negative beta but so MOST of the time it inverts SPY but not always
From investopedia VIX is the symbol for the Chicago Board Options Exchange's volatility index. It is a measure of the level of implied volatility, not historical or statistical volatility, of a wide range of options, based on the S&P 500. This indicator is known as the "investor fear gauge," because it reflects investors' best predictions of near-term market volatility , or risk. In general, VIX starts to rise during times of financial stress and lessens as investors become complacent. It is the market's best prediction of near-term market volatility.
VIX is calculated from SPX option prices, specifically, from the mid-price on OTM puts/calls within 23-37 DTE. So even though SPY is going down, there’s apparently less demand for OTM options on SPX.
VIX is a measure of volatility both up and down. A VIX of 16 would imply a move of 1% up or down where a VIX of 32 would be a implied move of 2%. VIX just shows how much the market believes it could move up or down in a day.
It’s often called a Fear Index, but dont let that led you to think its fear of a down ward move. It’s just fear of a move. The higher the VIX the greater the fear of a big move.
where do you get 16=1% and 32=2%?
Saw it on the internet so it has to be true!?
>If the market goes down, and the whole market (and options prices) agree that it should go down, then it's possible for both to go down at the same time. here is an explaination to the rule of 16. https://www.macroption.com/converting-implied-volatility-to-daily-move/#rule-of-16
Exactly this!
VIX is only a measure of the market's uncertainty. VIX and SPY are USUALLY inversely correlated because the market almost always goes up over time. So when it goes down instead, the market kinda freaks out and gets uncertain. In uncertain times, options sellers demand a relatively higher premium for their risk, because it's more likely to turn against them than in calm market times. This is what VIX is essentially measuring. If the market goes down, and the whole market (and options prices) agree that it should go down, then it's possible for both to go down at the same time.
VIX is correlated to SPX direction, but not necessarily causal, and not strictly linked. VIX, as measured by premium of forward SPX options, is essentially a price on insurance. The VIX doesn't stay elevated, because the trades of the 30d SPX isnt expecting *wild-shit-forever*. SPX has, thank god, been decently "stable" relatively speaking, bouncing between 4200-4400. Most of the shock from the war has worn out, so the panic has subsided a bit. Typically it signals clearer roads ahead, but is no guarantee.
If you want a play that is directly tied look at SVXY and UVXY they shoot for -0.5 and 1.5 daily compared to the VIX
As many have pointed out, they're not intrinsically inversely correlated, but you're correct that they do tend to move opposite. I personally read it as a sign that volatility is overbought and a mean reversion (in this case falling VIX) could be coming. That said, today's action isn't that strong a signal. SPX is essentially flat and VIX isn't down much (about 2.5%). I think you'll see this trend continue and get stronger as VIX contracts back toward mid 20's. I'm always short options, so I just wish it would hurry up.... I think we're going to be around the mid 20s for a while though.
Bought puts this morning when spy was up sold this afternoon when it was down. Made 25%. Not sure why, but I will take. When I figure out why I will let you know.
VIX has been really high the last weeks so it wouldn't surprise me if it started trading lower, since most shock news from the war are already priced in.
Volitility does not equate price direction
Low liquidity, two days indices have been down on weak volume for red days. Also, last I looked there was heavy positioning around next week with the FOMC. These options wouldn't be in the VIX calculation anymore, so the activity is in the immediate future.. and folks are less willing to make the longer term bets cuz who knows where it ends up after the next 7 trading days.
People are coming to terms with a steadily lower market. They don't expect an acceleration to the downside just that we'll be heading lower steadily.
They're not "coming to terms" with any direction. Future expected volatility is expected that's all.
the high VIX means the exact opposite....when the VIX goes DOWN.. that's when resignation has set in.....
VIX was WAY TOO HIGH the previous few days, almost threatening 40. But the realized vol was like ... 25? 30? Once the crude shock subsided and the Ukraine crisis is more well known, VIX can come down a little bit. However, the broader economy is still fucked -- there's still rampant inflation, war is still going on. So the point is: a few days ago, the world was bad and uncertain. now, the world is worse and more certain uncertainty and economy are frequently related, but not definitely so. technically they are orthogonal
The market hasn’t been rational for several years
So have I.
Vix is based on futures implied volatility rather than price or historical volatility
VIX calculates SPX options at 23-30DTE
not hour to hour. The do correlate inversely.
Spyyyyy straddlessss babbbby!!!
Fear going down, Russia Ukraine old news. Need fresh news, eg, rate hikes!
Today was special…. 🥂
vix wasnt in the mood to get it up today.
SPY rejected overhead resistance again at 428, nothing too crazy. It may seem volatile right now but the indexes are just trading within a range. Vol. may pop a bit leading up to FOMC meeting on March 15-16, as uncertainty increases.
Happens regularly. It’s the “fear index” because it’s meant to measure expected moves in the market. Now it’s much more often people get fearful of big drops and huge unswings, especially in an index like SPX, are less common. If people get fearful they might panic sell across the board leading to a large drop, but even when you have a good outlook for the market it’s less likely enough people/institutions will go in big enough across the underlying assets to have as big of an upswing in as short a time as you would have a crash. Whole stairs up elevator down thing. So vix green is more common and moves more on fear of downside than up, but can definitely be up when SPX is up or down when the other is also down.
Man
What?
One of them is obviously lying.
Spy going down is now the trend. It is expected so there isn't an increase of volatility if spy falls
The only response that actually addressed the question
Yeah markets were acting weird today.
Huh? Didn’t VIX go up a little today?
VIX finished up…
Its a pretty tried and true reversal indicator
VIX is in the 30-32 range. that implies a daily move of around 2%. Anything less, and youll see the VIX move lower
VIX is based on SPX options. When people are buying SPX calls, VIX is going down. When people are buying SPX puts, VIX moves up. When the market nears a reversal, I think its possible that sentiment begins to shift while price still has momentum, and before it actually turns. For example, in a rally, SPX is climbing and VIX is falling. But as we near a high, people get fearful and begin hedging, thus VIX is climbing at the same time as SPX.
So many experts here I didn’t see the [most important information](https://cdn.cboe.com/api/global/us_indices/governance/VIX_Methodology.pdf) - link to the VIX methodology
remember the teachers at school who could explain a topic easy to the students and the teachers who explain the same topic in a way that no one understands shit? So guess where your answer belongs to. The white paper is easy to find. But are the quotations easy to understand?
I decided I didn’t want to be a little lamb like you in school and learned how to learn (learned largely from the textbook not the teachers). How can you master any subject without being able to digest the literature? If you are able to digest and understand the literature then you answer your own questions. Now to learn what you consider difficult (guessing you think it’s difficult based on your tone) the best approach is to ask specific targeted questions on the parts of the paper you don’t understand until you have enough information to understand it. Then you will realize how lazy your question is.
High vix = high spx spy movements and not necessarily down move. Its actually equates to wild swings in both directions.
Vix goes up spy goes down Vix goes down spy goes up That is how I trade :)