VIX Oscillator

17 בדצמ׳ 2024

OVERVIEW
Plots an oscillating value as a percentage, derived from the VIX and VIX3M. This can help identify broader market trends and pivots on higher time frames (ie. 1D), useful when making swing trades.

DATA & MATH
The VIX is a real-time index of expected S&P 500 volatility over the next 30 days, derived from option prices with near-term expirations. Similarly, the VIX3M measures expected volatility over the next 90 days.

Dividing one by the other yields an oscillating value, normalizing the relative strength of the expected volatility. Most commonly the VIX is divided by the VIX3M. However, because the VIX is inversely correlated to market sentiment (typically), this indicator divides the VIX3M by the VIX to visually correlate the plot direction with the anticipated market direction. Further, it subtracts 1.1 from the quotient to visually center the plot, and multiplies that difference by 100 to amplify the value as a percentage:
( VIX3M / VIX - 1.1 ) * 100

This variation makes identifying sentiment extremes easier within a buy-low-sell-high paradigm, where values below zero are bearish and values above zero are bullish.

PLOTS
Two plots are used, maximizing data fidelity and convenience. Candles are used to accurately reflect the quantized math and a Linear Regression is used to simplify contextualization. If you're not familiar with what a Linear Regression is, you can think of it like a better moving average. High / Low zones are also plotted to help identify sentiment extremes.

This combination allows you to quickly identify the expected sentiment (bullish / bearish) and its relative value (normal / extreme), which you can then use to anticipate if a trend continuation or pivot is more likely.

INPUTS
Candle colors (rise and fall)
Linear regression colors and length
Zone thresholds and zero line

17 בדצמ׳ 2024

הערות שחרור

• Added indicator page link to the top of the source code.
  

12 בינו׳

הערות שחרור

• Improved logic to more gracefully handle null values on lower timeframes
  
• Other minor enhancements
  

13 במאי

הערות שחרור

• Added ability to explicitly disable / enable plot inversion.
  
• Other minor code enhancements.
  

4 ביולי

הערות שחרור

• Modified request.security() to included barmerge.lookahead_on, allowing the plot to update in realtime (rather than being delayed by 1 bar).