codypd

Is the VIX predictable?

INDEX:VIX   CBOE Volatility Index
vix
572 23 5
vix
I read an article the other day claiming "The VIX             is Very Predictable"

It claimed the method to buy/sell "the VIX" (which itself can't be bought or sold) is to take the 11 day ema and sma , plot them and buy when the ema goes under the sma , and sell when the ema goes above the sma .

Here is a chart of the vix             and a little indicator that I coded up using the method described. The red line is the ema and the white is the sma . I colored the background "green = buy" and "red = sell".

Seems there needs to be a bit of refinement for this method to work ... but it's a start. Would welcome other ideas in the comments.

from https://marketsci.wordpress.com/2008/07/28/the-vix-is-very-predictable/
My small experience of trying to trade the VIX via VXX was far less then predictable. VXX is NOT a predictable product. My experience was aprox. 30% correlation when VIX was positive and near 1 to 1 correlation when VIX was down. Occasionally the two moved in opposite directions. Be very careful with VXX.
+1 Reply
codypd flappinfish
My experience is when you are playing the VIX derivatives you are playing two things: the VIX and the derivative's contango/backwardation behavior. I have found that when youtrack them seperately the success rate improves a great deal. I trade primarily UVXY and SVXY because I have modelled their contango structure which is pretty consistent once the variables are understood.
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codypd flappinfish
Here is an example of a ratio chart that shows the consistency and predicatability of contango for UVXY. When in contango, the rate will be fairly consistent over time for a given "run"
Using Contango / Backwardation channels to predict UVXY prices

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codypd, take a look at this: http://imgur.com/aHeZMmN results based on non-summer months, with VIX between 12 and 13, and VIX is dropping. In most cases it gained during the next couple weeks.
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AlgoGuy AlgoGuy
disregard that one...there was a mistake...will fix and re-upload
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AlgoGuy AlgoGuy
fixed version http://charts.stocktwits.com/production/original_35264201.PNG?1428850478
+1 Reply
codypd AlgoGuy
Thanks! Will look at it.
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AlgoGuy codypd
the catch is, futures spread is high, so VIX will most likely go up, but futures spread will probably narrow and VXX might by unchanged.
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codypd: I don't know whether or not you read the follow-up article to "The VIX is very predictable" or not. The article (link below) looks at the VIX and historical volatility in more detail. I also don't know if the article will help in any refinements you might make, but thought I'd post it just in case. The comments section has some good stuff also. Good luck!

https://marketsci.wordpress.com/2008/11/12/trading-strategy-the-vix-spread-and-the-stock-market/

+1 Reply
codypd mike1v
I hadn't. Thanks!
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