VIX Trading System


Function Name: vix_ts

Tags: fear index, s&p 500, vix, volatility index

Category: Volatility

Three data series are used in the system: the iPath S&P 500 VIX (VIX), SPDR S&P 500 exchange traded fund (ETF) (SPY), and the ProShares Ultra Dow 30 ETF (DDM). SPY is a proxy for the S&P 500 and DDM is a leverage version of the Dow Jones Industrial Average (DJIA). All calculations are done on the VIX series, and when a VIX buy signal is issued, equal amounts of SPY and DDM are bought the next trading day.

A time series has three values for each day: low, high, and close. For this trading system, the VIX time series is calculated based upon the low of each day. The system rules are as follows:

For buys:

1. Calculate the 50-day moving average using the low price from the VIX time series.

2. Count the number of times in 11 days the VIX is below its moving average. Do this by looking back 11 days from the current bar and checking to see if the VIX is below the 50-day moving average. The VIX must have 11 days below the moving average before a signal is generated.

3. If the 11-day count is exactly 11, then buy the SPY and DDM.

The "sell" rules are the same as the "buy," with the exception that the VIX must be above the moving average and the count reflects the number of days the VIX is below the average.

COLORING NOTE: If past 11 days are below moving average, MA line will be colored red. If past 11 days are above MA, the line will be colored green. Otherwise, the line will be blue.


Author: Trent Gardner

Source: Stocks & Commodities, December 2012: "Using VIX To Forecast The S&P 500"




moving average calculation range


Default Value: 50  |  Minimum: 1  |  Maximum: 999


Type: Numeric


lookback period to check if vix is above or below the MA


Default Value: 11  |  Minimum: 1  |  Maximum: 100


Type: Numeric


threshold number of bars in the lookup period that will trigger buy/sell signal


Default Value: 11  |  Minimum: 1  |  Maximum: 100


Type: Numeric