NicTheMajestic

Volatility Prism [Nic]

What is this
The volatility rainbow tracks divergences in a security and its volatility index. This can be used to identify periods of heightened implied (future) risk.

About Volatility
The volatility is calculated by looking at put / call ratios. When VIX goes up it means that puts are outpacing calls. This is a bearish signal.

About Correlation
When the security goes up while the VIX goes up, the divergence on the plot will increase and turn a color. This should be a warning.

Volatility Rainbow
This is a similar indicator, but this one merges all signals into a single line.
Release Notes: What is this
The volatility prism tracks divergences in a security and its volatility index. This can be used to identify periods of heightened implied (future) risk.

About Volatility
The volatility is calculated by looking at put / call ratios. When VIX goes up it means that puts are outpacing calls. This is a bearish signal.

About Correlation
When the security goes up while the VIX goes up, the divergence on the plot will increase and turn a color. This should be a warning.
This index tracks the divergence of SPY/VIX, QQQ/VXN, IWM/RVX, DIA/VXD, GLD/GVZ, SPY/VVIX, SPY/TLT in one index.

Volatility Rainbow
This is a similar indicator, but this one merges all signals into a single line.
Release Notes: Added Weights
Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in a publication is governed by House Rules. You can favorite it to use it on a chart.

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