Synthetic VIX

The Synthetic VIX indicator is based on Larry Williams’ article "Fix the VIX":

Describing what markets do, Bernard Baruch put it best: “Markets fluctuate”. This idea is embodied in the Chicago Board Options Exchange (CBOE) volatility index, VIX. Introduced in 1993, it became a very popular way to measure market risk. The VIX, which derives from the implied volatility of stock index options, is intended to represent traders' expectations of volatility over the next 30 days. Essentially, the VIX reflects investors' fears: its high values are associated with high volatility conditions (and low market), while low values are associated with low volatility conditions (and market tops).

Unfortunately, the VIX is calculated only for S&P 500, NASDAQ Composite and Dow Jones Industrial Average indices. What about other markets? Luckily, it can be duplicated for any market — treasury bonds, gold, silver, soy beans, and even single stocks — with a simple formula:


The indicator view in the chart.

Image 36281

The indicator has the following parameters:

Image 36282


Period - setting of indicator calculation period.


Panel/Moving average period - selection of the indicator location in the chart:

  • New panel
  • Chart


Show value - display of the indicator value on the price scale on the left.

Scale/Auto-scaling - if this option is on, the scale will be automatically calculated, based on the minimum and maximum indicator values, so that the indicator would fit in the chart.

Color - color setting of the indicator.

Visual type - visual setting of the indicator display in the chart:

  • Line
  • Histogram
  • Hash
  • Block
  • Cross
  • Square
  • Dots
  • Up arrow
  • Down arrow
  • Axis label
  • Hide

Line style - setting of the line display style:

  • Solid
  • Dash
  • Dash - dot
  • Dash - dot - dot

Width - setting of the indicator line width.

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