CPI and ES
A Discussion on VIX and ES:
Now... let's address the elephant in the room.
Look at that Expected Range!
191 points … whaaaaaaat.
Big ranges!
If you traded last week, you already know big ranges are here!.
And what big, bold, and beautiful runners it produced!
Multiple members with 100+ point runners.
Just look at the ScoreBoard below.
Monster points accumulated … assuming you could have taken every trade, which is nearly impossible for us mortals.
I downloaded nearly 9,000 days of data from CBOE and stooq.com.
- CBOE VIX Data (csv download)
- S&P Data (csv download)
Then, with the help of Claude, I created the color-coded scatter plot chart below.
This chart plots 35 years of trading data … comparing the VIX level on any given day against the actual daily range of the SPX.
Every dot is one trading day.
The trend line tells the story.
The conclusion is simple and undeniable: the higher the VIX, the wider the daily range. When VIX is calm and green, ranges are tight and predictable. When VIX climbs into the red … ranges explode.
We are currently sitting at VIX ~30.
Note the vertical red line.
VIX & ES
When the VIX Speaks, You'd Better Listen
Speaking??? Screaming is more like it!
The VIX is sitting in the 28–32 range right now.
Pay attention.
This changes how you approach trading this week... IMHO... YMMV.
In fact, most traders should not trade next week at all.
High VIX + War + CPI... Oh My!
The VIX...the CBOE Volatility Index... is the market's fear gauge.
It's derived from S&P 500 options pricing and gives us a real-time read on how much movement the market is expecting.
When VIX crosses 30, expected daily ranges on the ES expand significantly.
We're not talking about a routine 30-40 point session. We're talking 60, 80, even 100, 150+ point swings on the table.
Options -vs-Futures:
Additionally, when the VIX is so high, options are very expensive. You are purchasing inflated premium for no reason at all, so be very cautious of purchasing options this week.
The volatility crush alone can turn a winning trade into a loser. Professional options traders sell premium in high VIX environments. They don't buy it.
As futures traders, we get the benefit of the range without the risk of volatility crush.
This week I would leave options alone... you do you.
Expect....
More violence.
More whipsaws.
Harder reversals.
More ways to blow up your account.
Big ranges are a double-edged sword.
Next Week's Big Test:
Can you offer a clear, definitive answer to the most paramount question …
Should I Be Trading?
… and then do the right thing whether you want to or not.
The market is telling you … through options pricing, through the VIX, through the implied move … that it expects a large range.
Respect it. Adjust your plan.
Trade with the discipline that turns a high-volatility week into an advantage instead of a liability.
Use the reference guide and principles below to build that plan.
Reference Guide
VIX Level by Level: What It Means for ES Traders
| VIX Level | Regime | Typical SPX Range | Trader Posture |
|---|---|---|---|
| < 15 | Complacent | 15–30 pts | Tighter Stops Ok, Smaller Targets. Usually chop. |
| 15–20 | Normal | 25–50 pts | Normal day. |
| 20–30 | Elevated | 40–80 pts | Reduce Size. Large Swings. |
| 30–40 | High Vol | 60–120 pts | Reduce Size. Hold Runners. Wide swings and hard retraces! |
| 40+ | Crisis / Panic | 100–500+ pts | No Thank You. Sidelines! |
* ES point estimates are approximate. Always confirm with current ATR and your own Battle Plan levels.
Principles
Trading Principles When VIX Is Elevated
Reduce Position Size
This is not optional.
Play stupid games, pay the stupid tax.
FAFO week.
Widen Your Stop... OR... Be Surgical
There are two schools of philosophy here:
- Size down and widen your stop.
- Size down and be exacting! Demanding touch-n-trades.
Extend Target Expectations
This environment means many more 50+ point runners. Let. It. Run.
Wait for Your Setup
Volatility creates FOMO. Don't be a victim of it.
Trade Less, Trade Better
High-volatility days punish over-trading and flipping back and forth. Go into the trading day with a clear plan … aka the Battle Plan.
Wait like a surfer for the perfect wave.
Let the chart force you to trade … a beautiful, big, fat pitch right down the center.
Honor the Trade Plan
More than ever, follow your trade plan … you do have a trade plan, right? Use our Trade Plan Builder.
This Week's Application
Adjust & Trust
Size Down If VIX > 20
Take your normal position size and reduce it proportionally. If VIX is running at double your baseline level, consider half-size positions until it normalizes. 1 MES works well!
Stick to Your Trade Plan
High volatility is when discipline pays the most... and when undisciplined traders give back the most. Your edge is the process. Trust it especially when it feels hardest.
TIP OF THE DAY
You do NOT have to trade this week... just saying.
QUOTE OF THE DAY
The biggest drawdown is emotional... not financial.
SCOREBOARD
| Battle Plan | Zoom | Core Strategy |
|---|---|---|
| 310 | 180 | 80 |
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