joyofjamie's Ultimate Guide To Reading The VIX.

Before we get into my wacky way of reading the VIX, we are going to talk about what the VIX is. The Chicago Board of Options Exchange was the first listed options exchange of the US. In 1993 the board announced the launch of the VIX, a real time report of CBOE's market volatility. In short, market up/VIX down.

Why do you base your strat around the VIX, Jamie?

As far as I can find in market history, only two things never change - The VIX and percentages. I'm a creature of habit, so in life I search for reliable constants to provide baselines for me. (In real life it's a clean car) When CBOE went down in June, I gained the best trading partner I could've dreamed - The VIX. Now we know she's been reliable through the years, but what else in the VIX appealed me? She's crazy! Completely backwards, and makes almost no sense. Right up my alley. ⚡

Before you understand my strategy you need to know how I chart the VIX:

When charting the VIX I use the 15 minute timeframe and the 21 EMA. I specifically use wicks for my levels. The highest point of the nearest, lowest candle. Vice versa: lowest point of the nearest highest candle. I know that makes no sense, let me show you. 🤟

Here is "The highest point of a low candle." I include wicks as the "highest/lowest" points. The VIX prefers the closest levels. So say a sandwiched low like this appears intraday, I add that as a level. However many times we do visit uncharted territory, and have to test old levels.

This is "The lowest point of a high candle." I find all decent levels by looking back in history and seeing if there is multiple touches. Ideally there is typically a level every .10, but not exactly 10 cents apart. Remember cents on the VIX are many more cents on /ES.

Now for gaps, you mark whatever timeframe gap you want baby! It's your chart. I mark them with dashed yellow lines.

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You can chart it, what's with the 21 EMA?

Have you ever wondered what baseline is for the market? Or do you have a baseline in your strategy? Mine is the 21 EMA on the 15 minute timeframe on the VIX. If we are above the 21 EMA market sentiment is bearish, and while trading options, I am only scalping calls or holding puts. When it is below it, market sentiment is bullish, so I do the opposite: Scalping puts or holding calls.

When the VIX gets wacky:

Sometimes the Vix does act out of character, but one scenario is most notable. When the VIX and /ES move up or down together, typically there is going to be a point in the session when the market no volume pumps. I haven't discovered a way to tell how long it will do this yet, but I've seen it happen all day!

Important notes:

Doji candles are my go to for reversals. It's important to remember gravestones are typically bullish when you're looking at the vix, and so the opposite with dragonflys. I have also found that while the VIX takes a sec to update at open, I dont full throttle into any positions off the open and get faked out since I wait for it.

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Coming up!

In the next blog, I'm gonna really break down the importance of wicks, and how I converted my VIX charting strategy to all other stocks I want to chart. Following that we will converge the first two blogs, and hopefully my strategy will come to life for you.

Until next time, friends! ✌️