Trading Vix

Technical Indicators

Once in a while the technical indicators start making news. Whether it’s the VIX, or a moving average, someone picks up the story and soon it’s on CNBC or Bloomberg as the news of the day. So, as an investor one has to ask, “are technical indications really a reason to buy or sell?” In some respects the answer is no, since “investing” is something different from swing trading or day trading.

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Let’s suppose you are in the same camp as we are and you think the long term outlook on gold is very positive. So, each time it dips below a certain value level, you add more to your portfolio, basically “buying on the dips”. This might be quite different from someone else who looked at a roll over as a reason to sell out. Yet, both traders are looking at the same technical levels.

It’s very true that the market pays a lot of attention to technical levels. We can show you chart after chart, breakout after breakout, bounce after bounce where the only thing that made the difference was a line drawn on a chart. Moving averages for example are perfect studies in when large blocks of money will buy or sell. Watch the action surrounding a 200 day moving average and you will see first hand the warfare that takes place as shorts try and drive it under, and longs buy for the bounce. It’s neat to watch.

The question of the day is this ” Are technical indicators such as the VIX a reason to get involved with a stock (or an average) because of what it says?” The answer is definitely maybe. Sorry, we know you were looking for more than that, but the fact is it’s a maybe, nothing more. If this market has taught you anything, it’s that it can do things that don’t appear rational, and do it for a lot longer than you would have suspected. When the VIX dipped below 20, everyone was looking for the reaction that “always” comes. Guess what? No reaction.

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We were asked last week if we put much faith in the VIX. Our response is the same as it’s been for all the technical indicators. Use them as a tool to help adjust your view of everything that is going on, but don’t base your actions on any one of them by themselves. Sure it’s true that an oversold indication will often lead to a bounce, but when? If something has become oversold, then it makes sense that at some point it fell from “balanced” to oversold right? Right. Well why didn’t it bounce when it became “balanced?” Again, because things often take time to correct.

The VIX, Arms, moving averages, stochastics, DMI’s, and all thirty five or so indicators are useful tools that help us try and find places to move money. But not a one of them is actually accurate enough to base your trades on. What you really want to do is get several of them pointing in the right direction at the same time. That is fairly rare, but when it happens, the chances of success are greatly enhanced. Just because the VIX might be making headlines, and could even become self fulfilling as everyone focuses on it, it’s still just one indicator out of many and putting all your eggs in one basket is dangerous.

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Trading VIX Derivatives: Trading and Hedging Strategies Using VIX Futures, Options, and Exchange Traded Notes (Wiley Trading) $40.72 A guide to using the VIX to forecast and trade marketsKnown as the fear index, the VIX provides a snapshot of expectations about future stock market volatility and generally moves inversely to the overall stock market. Trading VIX Derivatives will show you how to use the Chicago Board Options Exchange’s S&P 500 volatility index to gauge fear and greed in the market, use market volatility to your a…

VIX Options and Futures: How to Trade Volatility for Profit $99.94 …

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Trading VIX Derivatives by Rhoads, Russell Edition ILL, 1 $25.99 A guide to using the VIX to forecast and trade marketsKnown as the fear index, the VIX provides a snapshot of expectations about future stock market volatility and generally moves inversely to the overall stock market. Trading VIX Derivatives will show you how to use the Chicago Board Options Exchange’s S&P 500 volatility index to gauge fear and greed in the market, use market volatility to your advantage, and hedge stock portfolios. Engaging and informative, this book skillfully explains the mechanics and strategies associated with trading VIX options, futures, exchange traded notes, and options on exchange traded notes. Many market participants look at the VIX to help understand market sentiment and predict turning points. With a slew of VIX index trading products now available, traders can use a variety of strategies to speculate outright on the direction of market volatility, but they can also utilize these products in conjunction with other instruments to create spread trades or hedge their overall risk.Reviews how to use the VIX to forecast market turning points, as well as reveals what it takes to implement trading strategies using VIX options, futures, and ETNsAccessible to active individual traders, but sufficiently sophisticated for professional tradersOffers insights on how volatility-based strategies can be used to provide diversification and enhance returnsWritten by Russell Rhoads, a top instructor at the CBOE’s Options Institute, this book reflects on the wide range of uses associated with the VIX and will interest anyone looking for profitable new forecasting and trading techniques.

Trading Volatility in Risky Markets (Hardcover) $91.18 Trading and hedging volatility an increasingly important topic in the wake of the 2008 financial crisis. Trading Volatility in Risky Markets will discuss how active traders can profit from the profusion of new volatility-based products and how money managers can smooth their returns by hedging volatility risk. Author Michael McCarty explains traditional and new measures of volatility; the structure and mechanics of new volatility tools; and how these tools can be used by different levels of market participants to invest, trade, and hedge more effectively. While the history of trading of volatility-based instruments is brief, McCarty combines the historic data with and analysis to provide a taxonomy of how volatility measures reflect market sentiment and directional bias. Most importantly, he provides an in-depth explanation of how VIX options, futures, exchange-traded notes so that participants will be better prepared to use these tools confidently and avoid unexpected outcomes.

Short-term Trading Strategies That Work (Hardcover) $61.79 Short-Term Trading Strategies That Work, 2nd edition updates Connors and Alvarez`s original 2009 guide to 16 simple trading strategies crucial to the success of any trader or investor. These strategies are not only back-tested to 1995, but also have been traded by Connors and his team under a variety of market conditions. A must have book for anyone seeking to improve their trading and gain an edge, this work presents statistically backed strategies that cover the single best oscillator, how to make your trading edges even bigger, properly trading ETFs on the ever popular SPYs, QQQQ`s, and the most actively traded ETFs, trading using the VIX. This new edition includes three new quantified strategies for stocks, ETFs, and leveraged ETFs, updated results for 2008-2010, and additional commentary on lessons learned from the 2008 crisis and how these strategies performed in the midst of a market meltdown and chaos.

Options Volatility Trading: Strategies for Profiting from Market Swings by Warner, Adam Edition ILL, 1 $42.99 1. VIX and the Art of Position Maintenance 2. And So, My Friends, I Bequeath Unto You, an Index that Will Quantify this Thing You Refer to as Volatility 3. Big Vixin’: Can You Compare Volatility Across Eras? 4. Behind the VIX Curtain: How Do Actual Traders Analyze Volatility? 5. Like the Weather: The Trading VIX and Why It Doesn’t Work Like You Think 6. Up In Smoke? Can Buying High and Selling Low in Volatility Actually Be a Great Idea? 7. Smile Like You Mean It 8. Time On My Side 9. Ultra Shares: Double Your Way Down to Zero 10. Guilt by Coincidental Association: The Plus Tick Rule 11. Ratio Ratio 12. Conclusion

The Volatility Edge in Options Trading by Augen, Jeff Edition ILL, 1 $28.49  “Jeff’s analysis is unique, at least among academic derivatives textbooks. I would definitely use this material in my derivatives class, as I believe students would benefit from analyzing the many dimensions of Jeff’s trading strategies. I especially found the material on trading the earnings cycle and discussion of how to insure against price jumps at known events very worthwhile.” —DR. ROBERT JENNINGS, Professor of Finance, Indiana University Kelley School of Business   “This is not just another book about options trading. The author shares a plethora of knowledge based on 20 years of trading experience and study of the financial markets. Jeff explains the myriad of complexities about options in a manner that is insightful and easy to understand. Given the growth in the options and derivatives markets over the past five years, this book is required reading for any serious investor or anyone in the financial service industries.” —MICHAEL P. O’HARE, Head of Mergers & Acquisitions, Oppenheimer & Co. Inc.   “Those in the know will find this book to be an excellent resource and practical guide with exciting new insights into investing and hedging with options.” —JIM MEYER, Managing Director, Sasqua Field Capital Partners LLC   “Jeff has focused everything I knew about options pricing and more through a hyper-insightful lens! This book provides a unique and practical perspective about options trading that should be required reading for professional and individual investors.” —ARTHUR TISI, Founder and CEO, EXA Infosystems; private investor and options trader   In The Volatility Edge in Options Trading, leading options trader Jeff Augen introduces breakthrough strategies for identifying subtle price distortions that arise from changes in market volatility. Drawing on more than a decade of never-before-published research, Augen provides new analytical techniques that every experienced options trader can use to study historical price changes, mitigate risk, limit market exposure, and structure mathematically sound high-return options positions. Augen bridges the gap between pricing theory mathematics and market realities, covering topics addressed in no other options trading book. He introduces new ways to exploit the rising volatility that precedes earnings releases; trade the monthly options expiration cycle; leverage put:call price parity disruptions; understand weekend and month-end effects on bid-ask spreads; and use options on the CBOE Volatility Index (VIX) as a portfolio hedge. Unlike conventional guides, The Volatility Edge in Options Trading doesn’t rely on oversimplified positional analyses: it fully reflects ongoing changes in the prices of underlying securities, market volatility, and time decay. What’s more, Augen shows how to build your own customized analytical toolset using low-cost desktop s

Mastering Technical Analysis $34.95 Used – “Mastering Technical Analysis explores a wide range of technical analysis tools, detailing how to use each to improve trading performance. Topics explored include moving averages and the importance of crossovers; popular indicators from the VIX index and 10-30 DMA to stochastics; trends and pattern recognition; and more. In addition, this book examines how exchange-traded funds and other new securities as well as the emergence of China, India, and other international markets will impact p

Mastering Technical Analysis $99.83 New – “Mastering Technical Analysis explores a wide range of technical analysis tools, detailing how to use each to improve trading performance. Topics explored include moving averages and the importance of crossovers; popular indicators from the VIX index and 10-30 DMA to stochastics; trends and pattern recognition; and more. In addition, this book examines how exchange-traded funds and other new securities as well as the emergence of China, India, and other international markets will impact pr

Options Volatility Trading: Strategies for Profiting from Market Swings $24.38 New – Options Volatility Trading educates novice to intermediate investors on the nuances of the volatility index (VIX), the psychology behind it, and the best strategies to employ during dramatic market shifts. It provides a solid grounding in historical volatility patterns, distortions created by market noise, and how to use tools other than VIX.

Options Volatility Trading: Strategies for Profiting from Market Swings $23.92 Used – Options Volatility Trading educates novice to intermediate investors on the nuances of the volatility index (VIX), the psychology behind it, and the best strategies to employ during dramatic market shifts. It provides a solid grounding in historical volatility patterns, distortions created by market noise, and how to use tools other than VIX.