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Market UP and VIX UP

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Market UP and VIX UP

Postby keerthishare2 » Tue Nov 26, 2013 1:22 am

It is usual to find VIX and Market have opposite effect, but I was finding it odd , until I read the article below, to find this is not the case today.

Sharing the information that I read (related to such event in S&P500 - US)

"Market up VIX up!
The price performance of the market has been remarkable this past month. The S&P 500 index is over 100 points (6.7%) higher from the close on April 18th after a brief 2 day sell off.

The interesting thing I notice about today’s market is while the market (SPX 1647.27 =13.50) is higher by almost 1 percent today, the CBOE SPX Volatility Index (VIX) cash (13.82 +0.17)and VIX May and June futures are also higher today. Most traders are used to seeing the VIX volatility index fall when the market rallies. The conventional wisdom being when the market rallies investor worry lessens and implied volatility goes down. So what is going on?

Volatility is movement and movement in the market can be lower or higher. I am seeing the upside calls beginning to “catch a bid” which raises the premiums in the out of the money calls as investors perhaps are pointing to possibly even higher gains. Any increased demand (prices paid) for upside call options can have a positive impact to the matrix of implied volatility on which the VIX index is based.

Fear and Greed are the two psychological drivers of markets. I see institutional traders being fearful of not participating in a bull market, and other traders possibly getting greedy, thinking the opportunities to make money are to the upside now. There is nothing that says we cannot have an upside market crash.

This increased demand for out of the money calls is likely creating the current unusual state of Market higher … VIX higher."
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Re: Market UP and VIX UP

Postby keerthishare2 » Tue Nov 26, 2013 3:57 am

As a follow up, I made a study on the SPOT prices of Nifty Vs VIX (from 19-07-2010 till 21-11-2013)

Buy on a day's close where Nifty is Down and VIX is down and exit 3 days later at close :

Number of Trades: 128 | Number of Win: 66 | Number of Loss: 62 - Win loss ration 52%
Total Nifty Points (SPOT) : 2440.4
Maximum Loss: 252.1 | Average Loss: 71.3
Maximum Gain: 310.5 | Average Gain: 102.88

Contrarily, Buy on a day's close where Nifty is UP and VIX is UP and exit after 3 days later at close:
Number of Trades: 123| Number of Win: 51| Number of Loss: 72- Win loss ration 41%
Total Nifty Points (SPOT) : -1516.85 - seems to yield a loss
Maximum Loss: 233.1 | Average Loss: 82.65
Maximum Gain: 298 | Average Gain: 88.69

With that being said, Buying the nifty at 22-11-2013 already yielded above average points and 23-11-2013 is both up day... lets see how it works out .

It appears that one will gain in following one model (Going Long if NIFTY up and VIX UP or Going Short if NIFTY down and VIX down and exit in 3 days)

Not sure if this kind of study is already made and if a strategy is put in place already, but seems to be a good one for people who cannot spend long hours in market.

Thoughts are welcome.

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Re: Market UP and VIX UP

Postby sunnyman_46 » Tue Nov 26, 2013 6:39 am

Good observation..........
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Re: Market UP and VIX UP

Postby keerthishare2 » Tue Nov 26, 2013 9:22 am

Bought 6100 PE @ open (37.5) since yesterday was BOTH UP days.
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Re: Market UP and VIX UP

Postby keerthishare2 » Tue Dec 03, 2013 9:23 am

Yesterday was BOTH up Days and hence bought PE 6200 near close... and it is at gain of 15 points for now. Let me watch for next couple of days.
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Re: Market UP and VIX UP

Postby keerthishare2 » Tue Dec 03, 2013 9:24 am

Please note: this is for practice/observation only and I am trading this setup only in virtualstocks.icicidirect.com
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Re: Market UP and VIX UP

Postby keerthishare2 » Wed Dec 04, 2013 11:31 pm

On Dec 2: BOTH UP - Bought 6200 PE near close @ 120
On Dec 4: BOTH DOWN - Exit 6200 PE near close @ 140 (20 points gain ) and Bought 6200 CE near close @ 150
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Re: Market UP and VIX UP

Postby keerthishare2 » Wed Dec 04, 2013 11:36 pm

I am going to add one more position on 6150 CE in tomorrow's open as well .
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Re: Market UP and VIX UP

Postby keerthishare2 » Thu Dec 05, 2013 10:34 am

Unable to catch the 6150 CE, 6200 CE at over 49 points gain.
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Re: Market UP and VIX UP

Postby sunnyman_46 » Thu Dec 05, 2013 2:35 pm

keerthishare2 wrote:Unable to catch the 6150 CE, 6200 CE at over 49 points gain.


Good one!

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Re: Market UP and VIX UP

Postby SOMU » Fri Dec 06, 2013 9:59 pm

nice job
Image

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Re: Market UP and VIX UP

Postby keerthishare2 » Fri Dec 06, 2013 10:55 pm

Both UP day on 6_DEC--- was not able to exit near close (53 points profit), but depending on Monday's open and reaction for first hour, I will try to exit or continue to hold.
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Re: Market UP and VIX UP

Postby sunnyman_46 » Sun Dec 08, 2013 7:57 pm

Seems tomorrow it would have a blast upside on Market opening .
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Re: Market UP and VIX UP

Postby keerthishare2 » Mon Dec 09, 2013 9:43 am

made a high of 296 :( missed to book it... anyway still in 81 points profit.
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Re: Market UP and VIX UP

Postby keerthishare2 » Mon Dec 09, 2013 1:44 pm

Exit after 3 days ... and hence booking 76 points. in 6200 CE.
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