SPY-VIX Divergence Strategy
Strategy Overview
This strategy monitors divergences between the S&P 500 index and the CBOE Volatility Index (VIX) to identify high-probability buying opportunities with an impressive 75.3% win ratio and a profit factor of 3.16.
HOLD
Neutral: No active buy or sell signals at this time. Monitor the market for potential setups.
Current Status:
NEUTRAL
How the Strategy Works
1 Setup
Monitor both the S&P 500 and VIX on the same chart. During market corrections, VIX typically spikes as institutions increase hedging through put options.
2 Entry Conditions
- If a second, lower low occurs in the S&P 500 after the initial correction, observe the VIX response.
- A divergence is noted if the second VIX spike is not higher than the first, suggesting decreased institutional hedging.
- Ensure the S&P 500's price remains within two standard deviations of the 30-day moving average (Bollinger Bands).
- If conditions are met, initiate a buy position on the S&P 500 at market close.
3 Exit Strategy
- Exit when the S&P 500 closes above the 30-day moving average.
- Alternatively, exit if S&P 500 closes more than two standard deviations below its 30-day moving average to limit losses.
Performance Metrics
- Win Ratio: 75.3%
- Profit Factor: 3.16 ($3.16 gained for every $1 risked)
SPY-VIX Chart
The yellow markers on the chart indicate potential divergence points where a buy signal was generated.
Current Indicators
- S&P 500 Price: $621.72
- VIX Level: 20.38
- SPY 30-Day MA: $622.72
- Lower Bollinger Band: $601.47
- Upper Bollinger Band: $643.96
- Lower Low Detected:
- VIX Divergence Detected:
Recent Signals
| Date | Signal | SPY Price | VIX Level | Result |
|---|---|---|---|---|
| 2025-03-28 | BUY | $554.02 | 21.65 | -3.41% |
| 2025-02-03 | BUY | $594.22 | 18.62 | 0.67% |