Friday, January 4, 2013

Buy When the VIX is High (Above 40)

Having just shown that the best risk/reward is when the VIX is below 20, you'll find a surprisingly good bounce in $SPX when VIX spikes above 40. In the chart below, from 1996 to 2012, there were 5 great buying opportunities when VIX over 40. Unfortunately, buyers using this strategy were destroyed  in 2008. So there you go: it works 83% of the time.

A great chart from Short Side of Long below: