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Cross Asset Volatility Chart – VIX. How To Set Up Using Trading View
We just have a quick question here from Rodrigo as well as Stuart, asking us about the VIX chart or the volatility chart that we have set up in trading view, how we can set it up, and how we can use it in our trading.
Now, just shortly we did do a video about volatility and how that refers to various asset classes last week, guys, so make sure to check out that video. Just to quickly show you how we set up this chart, it’s actually quite easy.
RECOMMENDED READING: HELP WITH CROSS ASSET VOLATILITY CHART AND INDICATORS
It’s basically all of the various volatility indexes that we like to look at. The first one would be, of course, the classic VIX, which looks at the S&P 500, and that is the one in gold. Now that is a good one to use for equities.
Then you also have OVX. OVX is the volatility index for oil. Then you have GVX or GVZ, which is the volatility index for gold. VVIX is an interesting one, that actually is the blue line, the light blue line. Think of it as the VIX of VIX in that regard, so it basically tracks the volatility of the VIX, which is an interesting one to look at. It does sometimes have a little bit of a lag, but it is an interesting one to overlay and then see how the expectations of volatility changes for the S&P 500.
Then also another one that we have on the chart here, you’ll see this is a combination, is the euro, the euro VIX, the JI VIX, as well as the pound VIX. So this is basically the volatility tracking the ETFs for the euro, the Japanese yen, as well as the British pound.
Now we don’t have access to the JP Morgan volatility index for forex, so this is a good combination to use to track the overall volatility of the currency space as well. Now, as we said, it won’t include things like the Aussie dollar, the kiwi dollar, the CAD, et cetera, so it only tracks the movements of the euro, the yen, as well as the pound versus the US dollar in terms of volatility. But it does give you an overall view of the overall forex volatility.
Then we also have TYVIX, now, that is the treasury, and VIX, so it basically tracks treasury bond volatility. And then we have VXHYG, which is basically the volatility index tracking high yield corporate bonds. Very interesting one, especially to look at in terms of the overall volatility.
For equities, Rodrigo, the best one to use, obviously, is the one that works specifically for equities, which is the VIX, and you can also use the VVIX. Something you can also use in line with that is the high yield corporate bond VIX.
Basically, it gives you the volatility of expected in and outflows for high yield corporate bonds.
Now, obviously, when we have very big risk of flows, we expect bonds to come down, so we expect the volatility of those bonds to go up, which is something you just need to look at.
Also, keep in mind that most of these ones that we look at has either a delay or only trades in terms of the New York open, so keep that in mind, you’re not always gonna have access to it, there should be a little bit of a delay to the futures one we use for the S&P and some of the other ones will only open up when the New York Stock Exchange open, so keep that in mind. Now, how you can add them is basically just start with a normal VIX chart.
So open up a chart, add in VIX, I’ve called this one cross asset volatility, because that is what this specific chart is tracking. If we go to a weekly timeframe, for example, it shows the massive spike that we saw across asset classes as the market went into that tailspin, and now we’re looking at cross asset volatility also coming down across the board. So that is why we have all of the volatility indexes on this chart simultaneously.
Now, how you can add them is if you just start with a VIX chart, just go to compare, and then instead of saying compare, say add symbol, and then you’re basically just gonna type in all of the various symbols.
So let’s say it is OVX, you’re just gonna type in OVX, and then you’re just gonna select OVX, and that should put it on the chart. So make sure to say add symbol, not compare, when you compare it, it’s basically gonna give you, it’s gonna change the actual data or the actual numbers and change it to a percentage, which is less useful.
Always remember that there’s gonna be an inverse relationship between an asset class and its volatility, so whenever we see volatility spike up, we expect downside in the asset, whenever we see volatility come down, we expect upside in the asset.