Watching the VIX for SPY Trades
Use the market's fear gauge to time SPY entries and exits.
Fear & Greed Index
(CNN Business)
Why the VIX Matters
The CBOE Volatility Index (VIX) tracks 30-day implied volatility on S&P 500 options. When fear spikes, VIX soars and SPY usually sinks. A calm VIX signals risk-on sentiment and supports higher SPY prices.
- Inverse Correlation: VIX up → SPY down (and vice-versa) roughly 80% of the time.
- Volatility Regimes: VIX < 14 = complacency; 14-20 = normal; 20-35 = risk-off; >35 = panic.
- Mean Reversion: Extreme VIX readings tend to revert, presenting contrarian trades.
VIX-Driven Playbook
Blend our bot's signals with VIX context:
- VIX Breakdown: When VIX loses a prior support level (e.g., 20 → 18) and our bot flags a long, size up SPY calls.
- VIX Spike Fade: Intraday VIX > +10% with SPY at a daily support → look for reversal longs once VIX stalls.
- VIX Contango vs. Backwardation: Check VIX futures term structure; backwardation confirms sustained stress—trade SPY puts or stay flat.
Dashboards & Indicators
Keep these on your workspace:
- TradingView VIX/SPY Overlay: Overlay VIX (inverted) on SPY to visualize divergence.
- CBOE VIX Futures Term Structure: Monitor contango/backwardation for risk tone.
- VVIX: Vol of VIX itself. Rising VVIX ahead of VIX suggests a volatility event brewing.
- 10-Day VIX SMA: Simple moving average to identify regime shifts.
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