This process is very important for every trader and should be done by everyone for all the underlyings they are going to use because it allows us to really know what we are dealing with and how to deal with it.
The Futures in question is the VIX.
Introduced in 2004 on the Cboe Futures Exchange℠ (CFE®), VIX futures offer market participants the ability to trade a liquid volatility product based on the VIX index methodology.
VIX futures reflect the market’s estimate of the value of the VIX Index at various future maturity dates. VIX futures offer market participants a variety of opportunities to implement their vision using volatility trading strategies, including risk management, alpha generation and portfolio diversification.
Full contract: https://www.cboe.com/tradable_products/vix/vix_futures/
Mini contract: https://www.cboe.com/tradable_products/vix/mini_vix/
NATURE OF THE INSTRUMENT
First of all we will analyze the nature of the instrument: breakout or reversal.
To do this I use some codes written by me and I run them on the underlying on different Timeframes. It’s a simple stop and reverse code.
In total I have 4 methods for detecting breakouts and 4 methods for detecting mean reverting. Whenever one of them produces a positive result I give a “+” sign.
From the analyzes, the result is a REVERSAL nature. So in the future we will focus on strategies based on this nature.
I first analyze the daily volumes via TradingView and Tradestation. I use a 200-period average on the volumes to calculate them.
Full contract: Daily volumes..
We have an average of 80k contracts per day.
Full contract: Intraday volumes..
As you can see, the volumes are good for intraday trading.
However, the major contracts can be found around 8 in the morning to 15 in the afternoon (exchange time)
With more analysis we might find some bias interested in these volumes …
Mini contract: Daily Volumes..
We have an average of 20k contracts per day.
Micro contract: Intraday Volumes..
Having done this, I move on to the movement of the instrument on a monetary basis. This step is very important for future strategy writing and risk calculation. To do this I use a small indicator that I wrote that multiplies the range of the candle by its BigPointValue.
I have done this on several timeframes. Here are the results:
As I said previously, these metrics are very important because they allow us to calculate the riskiness of the underlying and use appropriate stoplosses for our strategies. For example, we should not use a stoploss of $ 200 for a strategy that is on the market for more than one day on this underlying basis.
RETURNS: INTRADAY, DAILY, WEEKLY AND MONTHLY
Now let’s move on to analyzing price behavior in relation to hours, weeks and months.
To do this, I use some strategies written by me and then analyze the results through software or through some sites that offer these services.
Here are the behaviors that I was able to analyze for this futures…
This data is obtained from the analysis of long operations made at the opening of the candle and closed at the close. In this way with the extracted data and the interpretation we can obtain the trend of the futures during the day …
These data are obtained using a strategy with daily bars that enters at the opening of the candle in the long position and exits at the close of the same candle.
In this part we look at the correlations between the data. I used the data provided by my broker ( Tradestation ) and used a python script to interpret it.
This section shows the performance data in relation to the years.
Finished analysis! In the future, I intend to add more information and graphs to my analysis to provide you with further insights and advice. I hope it helps you to better develop your strategies!