The VIX Index was first introduced in 1993 by the CBOE (Chicago Board Options Exchange). It measures the stock market implied volatility 30 days in advance and can be an incredibly useful tool in understanding stock market movements as well as the outlook.
The VIX Index is often referred to as the fear index as it can provide a good insight into the sentiment of investors, especially during periods of weakness and corrections.
VIX Index – 3 Month Chart
The 3 month daily VIX Index chart below from the end of December 2015 to March 28 2016 gives a good indication what is meant by the “fear index”. The VIX Index spiked this year to its highest level since August 2015 when it moved to above $50. This year in January and again February, the VIX Index spiked to above $30 which is high for the index.
Investors feared the stock market rally that started in March 2009, was at an end and the VIX Index reading indicated investor sentiment was bearish, as the VIX reading climbed higher. Since then the VIX has fallen back to $15.00 which historically is not actually “low”.
VIX Index – Strategy Developed In 2003
During the bear market that followed the dot com bubble market collapse I studied and designed a strategy to profit from the VIX Index. I implemented the strategy in 2003 after backtesting it for two years. Since then I have tweaked and updated the VIX Index strategy semi-annually.
VIX Index Update for 2016
This strategy paper is continually updated as changes in the market outlook chnge yearly. This is the latest VIX Index Strategy update as of March 28 2016.
This strategy paper outlines how the VIX Index strategy works, how I apply it and how I profit from it. The update looks at 2016 and what I am expecting for the markets, especially as spring and summer approach. I discuss the changes I have had to make to the VIX Index strategy to accommodate the higher levels of volatility we have been experiencing since 2015.
This strategy paper is 3500 words in length and will need 14 pages if printed.
This is the latest update to the VIX Index Strategy. The remainder of this VIX Index discussion and outline is for FullyInformed members.
To read this latest VIX Index strategy update, FullyInformed Members can log in directly through this link or sign into the full members site here. Non-members can join here or read about the benefits of membership.
VIX Index Strategy Links
To learn more about this strategy I suggest reviewing the links below
Internal Stock and Option Trades Links
Disclaimer: There are risks involved in all investment strategies and investors can and do lose capital. Trade at your own risk. Stocks, options and investing are risky and can result in considerable losses. None of the strategies, stocks or information discussed and presented are financial or trading advice or recommendations. Everything presented and discussed are the author’s own trade ideas and opinions which the author may or may not enter into. The author assumes no liability for topics, ideas, errors, omissions, content and external links and trades done or not done. The author may or may not enter the trades mentioned. Some positions in mentioned stocks may already be held or are being adjusted.