Everyone knows that the VIX has been has been low low low for a long time. I saw an article that this is the lowest volatility in over two decades. What I don't understand how we can see some decent swings on S&P but the VIX still stays at 11 or so. Look at Friday. We had a 30 point move from high to low in the VIX didn't budge much at all. Today we had 15 point range and some crazy swings at FOMC announcement, still VIX at under 11. In the past I have used the VIX to help me decide on targets for profit per trade. But now I'm thinking somehow it's become irrelevant. Any thoughts? Maybe I should use ATR.
Remember VIX is calculated off the prices of options (both Call and Put) so if nobody is buying options VIX doesn't move regardless of what the SP500 does, Also a 30 point move is nothing
So if my goal is to Try to predict the size of a move, is it gonna be 2 points or 5, then is there any tool for me? This is super important because I use bracket orders exclusively. So every time I enter a trade I have both a stop loss and a preset target for profit both as limit orders. When the vix was moving around more like last year I adjusted my targets accordingly. I have pulled the data and the average of the VIX daily going back 10 years is 14. With it being so low now for so long I just don't know if it has any meaning for me. I don't know much about ATR.
"The CBOE Volatility Index® (VIX)® is based on the S&P 500® Index (SPX), the core index for U.S. equities, and estimates expected volatility by averaging the weighted prices of SPX puts and calls over a wide range of strike prices." The expected volatility (VIX) goes up when people buy Options. Prices of options go up when there is high demand for them. Prices go down for options if there is low demand. Hence, if nobody is buying options then demand is low and then VIX drops regardless of what the price of the SP500 does. The VIX does not "have to" rise when SP500 gets more volatile.
Which is why I thought it was so useful since I trade the S&P mini exclusively. Maybe there's a better way for me to choose how many points on going for on my profit target. Does anybody have ideas for me
Yes ATR is a better tool to use But there are many technical indicators you could use https://www.investing.com/indices/us-spx-500-futures-technical
This link might help you understand how the VIX works. http://www.schwab.com/public/schwab/nn/articles/ETFs-and-VIX-The-Facts-and-the-Risk