Latest / The Day Trading Podcast with Fexingo: Active Trading, Charts, and Short-Term Market Strategy / How Day Traders Use the VVIX 95 Level for Position Sizing
Transcript
- Lucas: Alright, let's talk about a number that doesn't get nearly enough attention from day traders: the VVIX at 95. Luna: The VVIX, for anyone who's newer — that's the CBOE Volatility of Volatility Index. It measures the expected volatility of VIX options. Lucas: Exactly. And right now, as of July 22nd, the VVIX is sitting at 95.55. That's actually a pretty interesting level historically. It's not screaming danger, but it's not dead calm either. Luna: So how do you use that as a day trader? Because most retail traders I see are just glued to the VIX or maybe the S&P 500 itself. Lucas: Right. The VIX tells you the market's expectation of volatility over the next 30 days. The VVIX tells you how uncertain that expectation is. When the VVIX is low — say below 95 — it means options market makers are pretty confident about the range of possible VIX moves. That's a green light to size up a little, because the probability of a sudden volatility explosion is low. Luna: And when it's above 95, like we're basically at right now? What does that signal? Lucas: Above 95, and especially above 100, you're entering a zone where volatility of volatility is elevated. That means the VIX itself could whip around more than usual. For a day trader, that's a signal to cut position sizes by maybe a third or even half. Your edge isn't as clean when the volatility landscape is shifting underfoot. Luna: So it's like a meta-volatility signal. You're not trading the VIX directly — you're using the VVIX to inform how you trade everything else. Lucas: Exactly. Let's ground this in what we're seeing. The VIX is at 16.64, which is actually slightly below the 17 level we talked about in a prior episode. The S&P 500 is at 7,499, down about half a percent over the last five days. So we're in a mild pullback, not a crash. The VVIX at 95.55 suggests the market is pricing in a slightly elevated uncertainty about that volatility — but not panic. Luna: So your recommendation would be: keep position sizes moderate? Not maxing out, but not sitting on your hands either? Lucas: Exactly. I'd say if you normally risk one percent of your account per trade, maybe pull that back to 0.75 percent. And widen your stops just a touch — maybe 5 to 10 percent wider than usual — to account for the fact that the VIX could spike intraday more than the current level suggests. Luna: That makes sense. I remember a few months ago when the VVIX spiked above 100 and then the next day the VIX jumped two points. Traders who were sized normally got wrecked. Lucas: Right. And that's the key: the VVIX is a leading indicator in that sense. It doesn't predict the direction of the VIX, but it predicts the potential magnitude of moves. When it's elevated, you want to be nimble. When it's low, you can lean in a bit more. Luna: So what's your specific framework for using the 95 level intraday? Lucas: Simple. First thing in the morning, I check the VVIX. If it's below 95, I'm comfortable taking trades with my standard size. If it's between 95 and 100, I reduce by 25 percent. Above 100, I cut by 50 percent and I'm looking for mean-reversion setups only — no momentum chasing. Luna: And what about the VIX itself? Do you factor that in separately? Lucas: Absolutely. The VIX tells you the overall level of fear or complacency. The VVIX tells you the stability of that fear. You want both working in your favor. For example, if the VIX is 15 and the VVIX is 93, that's a great environment for trend-following day trades. If the VIX is 20 and the VVIX is 110, you're in a high-volatility, high-uncertainty regime — best to trade very small or stay in cash. Luna: So right now we have a VIX at 16.6 and VVIX at 95.5. That's sort of a mixed signal — moderate fear, moderate uncertainty. Lucas: Exactly. It's a yellow light. Not red, not green. So you trade, but you're cautious. I'd be looking for high-probability setups — strong support or resistance levels, clear catalyst — and not forcing anything. Luna: That's a good discipline anyway. I think a lot of traders ignore the macro volatility context and just focus on the chart in front of them. But the VVIX gives you that macro layer in a very tradable form. Lucas: And it's free. You can pull it up on any platform that shows indices. Just type VVIX. It's that simple. Luna: So to recap: below 95, size up; 95 to 100, size down; above 100, trade tiny or sit out. Lucas: That's the framework. And if you want to get even more granular, you can look at the VVIX term structure or the vix vvix ratio. But for most day traders, just watching that 95 level is a massive edge. Luna: Yeah, and it's one of those numbers that's easy to ignore but really changes how you approach the day. Speaking of things that are easy to ignore but make a real difference — we should mention something about the podcast itself. Lucas: Sure. Look, we put these episodes out every day, no ads, no sponsors. And honestly, it's only possible because of listeners who chip in a couple of bucks now and then. If you've gotten value from these conversations — maybe a trade idea or a framework like this VVIX level — you can support the show at buy me a coffee dot com slash fexingo. That's buy me a coffee dot com slash fexingo. Luna: Even a few dollars a month genuinely keeps us going. It's that simple. And we really appreciate it. Lucas: Alright, back to the charts. One other thing I want to touch on: how the VVIX 95 level interacts with the VIX 17 level we covered a couple episodes ago. Luna: Oh, interesting. So if the VIX is at 17 and the VVIX is above 95, that's a different regime than if the VIX is at 17 and the VVIX is below 95? Lucas: Exactly. When the VIX is at 17, that's already a slightly elevated fear level. If the VVIX is also above 95, it means options market makers are uncertain about that fear level. That's a recipe for sharp intraday reversals. In that scenario, I'd be looking for fade trades — buying the dip or selling the rip — rather than trend-following. Luna: Versus a VIX at 17 with VVIX below 95, which would be more of a steady eddy environment where you can ride trends. Lucas: Right. And right now, with the VIX at 16.64 and VVIX at 95.55, we're in that middle ground. Not quite at 17, not quite at 95. So it's a day-by-day assessment. But if the VIX pushes to 17 and the VVIX stays above 95, I'd get more defensive. Luna: That's a good rule of thumb. So day traders should have both numbers on their radar every morning. Lucas: Absolutely. And one more thing: keep an eye on the VVIX for a break above 100. If that happens, it's a strong signal that volatility is about to get messy. Last time it broke above 100 in early June, the VIX jumped from 14 to 18 within a week. Luna: And traders who ignored that got caught offside. So the VVIX is really a risk management tool first and foremost. Lucas: Exactly. It's not a trading signal in itself, but it tells you how to size and what kind of setups to look for. That's the edge.