VIX is a measure of volatility. It takes the last 30 days of SPX, and measures it's variance.
I would guess that VVIX does the exact same thing to VIX, it takes the recent 30 days of VIX, and measures it's variance.
These two, along with SKEW are some of the methods investors calculate risk. I don't have the technical/financial knowledge on the ways investors can use risk management for better financial decisions.
If we do some "magic" we can transform these notoriously unchartable indices.
I am aware that since VIX takes the value of SPX, gets affected by both the volatility and the price of SPX. So technically from it's nature VIX tracks SPX.
If, for example, we plot the chart (1-VIX) we will see the following:
As we already know, he inverse of VIX follows SPX. Low volatility equals high SPX.
The calculation logic of the chart is: Scale down VVIX such that it is in a similar scale to VIX. Then subtract one from the other.
SPX is scaled down, after we divide it by M2SL.
I would guess that from 2009 to 2019, the growth was sustained because VIX was consistently low.
I also noticed that VVIX this year is incredibly low. One would expect that with such this year's recession that VVIX would also pick up the pace. During periods of very high volatility like the Great Recession, VVIX tracks VIX. Not this year however...
As a fellow trader pointed out quite some time ago:
Now VIX is higher and it's behavior with VVIX is very similar to 2008. We could say that the current situation is much similar to 2000 or with 1970s with stagflation and not 2008. Some things however, they smell foul. The elephant in the room maybe...
SKEW is in an all-time low. This could encourage investors to over-expose. THAT is when crashes happen. Overexposing when liquidity is being dried up from the FED, is a recipe for disaster. Even if we grow from here and everyone wins, who will have the money to pay back all these winnings? Especially now, with everyone investing like crazy, over-leveraging and such. And if EVERYONE is buying, who is selling? "Buying the dip" is part of the equation...
I believe that the bottom is NOT in yet. And since charting indirect stuff like VIX, like housing, yields, energy, all point to the same direction, I cannot ignore them.
PS. The elephant is the collapsed worldwide-production-chain. The elephant is that we are one step away from war or famine. And maybe, just maybe, the elephant is long gone... we just don't know it yet.
And we are talking about how the DOW will not fall. We are convinced that we are in the bottom and we are buying the dip. We are dreaming of more money quicker.
Tread lightly, for this is hallowed ground.
-Father Grigori
I am not a trader, I am a father of a cat named Alyx. Don't take what I say as trading advice.
I would guess that VVIX does the exact same thing to VIX, it takes the recent 30 days of VIX, and measures it's variance.
These two, along with SKEW are some of the methods investors calculate risk. I don't have the technical/financial knowledge on the ways investors can use risk management for better financial decisions.
If we do some "magic" we can transform these notoriously unchartable indices.
I am aware that since VIX takes the value of SPX, gets affected by both the volatility and the price of SPX. So technically from it's nature VIX tracks SPX.
If, for example, we plot the chart (1-VIX) we will see the following:
The calculation logic of the chart is: Scale down VVIX such that it is in a similar scale to VIX. Then subtract one from the other.
SPX is scaled down, after we divide it by M2SL.
I would guess that from 2009 to 2019, the growth was sustained because VIX was consistently low.
I also noticed that VVIX this year is incredibly low. One would expect that with such this year's recession that VVIX would also pick up the pace. During periods of very high volatility like the Great Recession, VVIX tracks VIX. Not this year however...
As a fellow trader pointed out quite some time ago:
Now VIX is higher and it's behavior with VVIX is very similar to 2008. We could say that the current situation is much similar to 2000 or with 1970s with stagflation and not 2008. Some things however, they smell foul. The elephant in the room maybe...
SKEW is in an all-time low. This could encourage investors to over-expose. THAT is when crashes happen. Overexposing when liquidity is being dried up from the FED, is a recipe for disaster. Even if we grow from here and everyone wins, who will have the money to pay back all these winnings? Especially now, with everyone investing like crazy, over-leveraging and such. And if EVERYONE is buying, who is selling? "Buying the dip" is part of the equation...
I believe that the bottom is NOT in yet. And since charting indirect stuff like VIX, like housing, yields, energy, all point to the same direction, I cannot ignore them.
PS. The elephant is the collapsed worldwide-production-chain. The elephant is that we are one step away from war or famine. And maybe, just maybe, the elephant is long gone... we just don't know it yet.
And we are talking about how the DOW will not fall. We are convinced that we are in the bottom and we are buying the dip. We are dreaming of more money quicker.
Tread lightly, for this is hallowed ground.
-Father Grigori
I am not a trader, I am a father of a cat named Alyx. Don't take what I say as trading advice.
Comment:
Another long-term distribution! Inspired by SPY_Master
A closeup, with a pattern from 2008
Link to his idea
A closeup, with a pattern from 2008
Link to his idea
Pattern taken from 2008. We are basically in ~May 2008 now.
And a macro chart