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: $665.67
  • VIX Level: 23.25
  • SPY 30-Day MA: $673.26
  • Lower Bollinger Band: $656.10
  • Upper Bollinger Band: $690.41
  • Lower Low Detected:
  • VIX Divergence Detected:
Recent Signals
Date Signal SPY Price VIX Level Result
2025-11-06 BUY $670.31 19.50 1.66%
2025-08-21 BUY $633.79 16.60 1.54%
2025-08-01 BUY $620.00 20.38 1.52%