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FWIW, the 15-day & 5-day VIX reversal should kick in
if , IF, the closing VIX today is greater than 30.80 (VIX OHLC so far
today is 30.80/30.93/29.14/30.00).
dave
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The rules from Chapter 2 of "Connors on Advanced Trading Strategies":
". . . this strategy adds the use of the RSI of the VIX itself to
provide insight into another way to time your entries more precisely."
Connors VIX Reversal 2 (from chapter 2)
". . before looking at this strategy, let's look at the underlying
principles of the VIX Volatility Index).
The VIX is the market consensus estimate of future volatility, based on
the "at-the-money" quotes of the OEX. It is published by the Chicago
Board Options Exchange.
The VIX can be found on all quote systems: end-of-day and intra-day.
"Common Wall Street wisdom" states that when the VIX is high, the market
is likely to rise and when the VIX is low, the market is likely to drop.
As far as I am aware, until my work revealed here, no one could show
where was the best high/low level to enter, and certainly no one has
shown it combined with an intraday reversal. This entry uses an even
more efficient way to measure overbought/oversold levels.
Here are the rules:
1. Take a 5-period RSI of the closing VIX
2. When the 5-period RSI gets to 70 or above, it signifies the VIX is
overbought and the market is oversold
3. When an RSI reading above 70 is followed by a downtick in RSI, buy
the market that day on the close.
Short entry:
When the 5-period RSI of the VIX gets to 30 or below, it signifies that
the VIX is oversold and the market is overbought. When an RSI reading
below 30 is followed by an uptick in its RSI, sell the market that day
on the close.
4. Exit seven trading days later (or use some type of trailing stop
exit).
5. A protective stop helps avoid potentially large drawdowns.
-----Original Message-----
From: THE DOCTOR <droex@xxxxxxxxxxxx>
To: RealTraders Discussion Group <realtraders@xxxxxxxxxxxxxx>
Date: Sunday, August 16, 1998 1:34 AM
Subject: re: MKT VIX DATA
>Just a quick refresher for those who posted the question as to how VIX
>is calculated.
>
>Vix is drawn from 8 options. The front month puts and calls bracketing
>the current cash value of the OEX and the same second month options.
>The front month is dropped on Monday of expiration week and the "third"
>and second month then make up the VIX.
>
>They are weighed so as to achieve an exactly ATM..exactly 30 day value.
>
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