Trading SPY And S&P 500 Using VIX: Leveraging Volatility Insights

The VIX measures how much investors expect the stock market to swing up or down. When it goes up, it might be a good time to buy stocks, and when it goes down, it could be a good time to sell. In this post we talk about different ways to trade based on the VIX’s movements.

We backtest the following trading rules:

We use a 10-day moving average for the BB. We like to use short time frames since they are more responsive. First, let’s try with a standard deviation of 3 for the upper band. When testing, there is no fills using 3 STD.

Below are the results using a standard deviation of 2.5:

Avg: 1.44
#Trades: 25
#Wins: 21
Max.win: 5.22
Max.loss: -1.39

The equity curves for STD-3 and STD-2.5 are shown below.

You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/using-vix-to-trade-spy-and-sp-500/