Thursday, December 18, 2008

First Sell Signal from VIX:VXV Ratio Since August

The VIX:VXV ratio has just triggered its first sell signal (for the SPX/SPY) since late August as a result of the VIX falling to the current level of 44.60.

Note that even though the holiday season typically has lower than normal volatility, I do not recalibrate the ratio or the signals to account for seasonal tendencies.

13 comments:

Anonymous said...

Just to clarify: By saying "sell signal issued" in this context you mean short SPX. Correct?

Bill Luby said...

That is correct: short the SPX/SPY.

(Additionally, one could consider getting long the VIX via options or futures...)

Damian said...

I don't have the sell on it - what ratio do you have? I have, EOD, 0.95

Bill Luby said...

Hi Damian,

I also have a 0.95 EOD number. EOD signals are much more robust than intra-day ones here, but the ratio did spend about two hours in the middle of the day below the 0.92 level.

Technically, using an EOD signal of just the ratio, the VIX:VXV is still neutral, though with a decidedly bearish lean.

FWIW, several other TA tools that I apply to the ratio did indicate an EOD sell.

Cheers,

-Bill

Anonymous said...

It looks to me that when the ratio is < 1.0 it is time to by SPY not to short:

http://stockcharts.com/h-sc/ui?s=$VIX:$VXV&p=D&yr=0&mn=11&dy=0&id=p48595512470&a=157087273

What am I doing wrong?

Anonymous said...

This will be a good test of VIX/VXV ratio because VIX is lower than 50 for two months, which is a good sign of market is less panic.

Can't wait to see what will happen in the next few days.

mL

Anonymous said...

bill is the offical sell .92 end of day on vxv:vixi thought it was below .96 end of day . please let me know. thanks

dave

Anonymous said...

How is the signal trigerred?
Looking at the chart one can see that a crossing of 1 from above is a good BUY SPX signal and a crossing of 0.92 from below is a good SELL SPX signal.
With the ratio at 0.95 now, it just crossed 1 from above and trendng down, so if anything this is still on the buy signal. What an I missing here?

Anonymous said...

Bill, does Friday's action muddy the waters? EOD shows VIX down slightly but VXV down even more. Ratio took a sharp turn up.

Bill Luby said...

Some interesting comments. My main computer died, so I am a little behind and am rushing to catch up...

Regarding the 'official' signal, I have generally presented this as an EOD close of <= 0.92 (sell) or >= 1.08 (buy), but I have expanded my thinking a little and will unveil some of this in 2009.

I don't think exits are as clean cut as entries. I think a reversal of 0.92 to 1.08 or 1.08 to 0.92 is valid, but so is a reversion to the 1.00 line. Some have suggested splitting the difference or similar strategies so that a 0.92 sell entry would trigger an exit or 1.04...or a 1.08 buy entry would trigger an exit at 0.96. Perhaps this is where the confusion arose about the 0.96 signal.

Finally, take a look at the intra-day chart of the VXV. It shows some very strange spikes in the last three hours of the day. Based on my reading of both individual charts, I do think end of day value of 1.035 is a valid number.

Of course, expiration days can offer up some strange data anomalies, so we will know much more come Monday.

Cheers,

-Bill

Anonymous said...

very interesting and encouraging results from your VIX:VXV study.
BTW, where one can get VXV quotes(history or delayed real-time), I tried on Yahoo! Swingtrader and a few other financial site, none seems recognize it as a symbole (tried ^VXV, $VXV, etc)

Bill Luby said...

I get historical quotes for VXV from StockCharts.com and/or directly from the CBOE.

On a real time basis, I get VXV quotes from TD Ameritrade's Command Center, but I rarely check it more than a couple of times during the day.

It is best to check with your broker to see if VXV is available on your trading platform -- and to confirm the ticker the broker uses.

Cheers,

-Bill

Oexmaster said...

I have been trading for over 20 years and Vixandmore is DEFINITELY my now MOST FAVORITE site...i visit it daily. However, I would just like to clarify something. I believe that the SELL SIGNAL is in effect but the ratio is actually reversed...s/b VXV:VIX....see the follwoing CBOE website for explanation..


http://www.cboe.com/micro/vxv/3monthvix.pdf

oexmaster

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics