At 9 AM ET today in my Daily Profit Room: Technical Tuesdays
Most traders look at the VIX as just a sentiment gauge. I use it to frame real trades.
Every morning, I take the current VIX value and divide it by 16. That gives me the expected daily move — up or down — in percentage terms.
If VIX is at 16, I expect the S&P 500 to move roughly 1%. If it’s 20, the expected move jumps to about 1.25%. It’s simple math, and it works.
This isn’t about predicting direction. It’s about defining range. Once I know the implied move, I can map out where the market is likely to hit resistance or find a floor — and that helps me place trades with better timing and risk control.
Why It Matters for Intraday Setups
The most powerful thing about the Rule of 16 is how it frames probability. If I sell a bear call spread above the expected top — say, 1.1% above the open — I know I’m positioned at the edge of the projected range.
I’m not guessing. I’m selling premium where the market is least likely to reach, based on what volatility is pricing in.
It also gives me a key signal for when to scale in or adjust. If the market pushes up to the top of the expected move and VIX is still falling, I’ll often take the other side.
But if VIX is spiking, I know that expected range is expanding, and I’ll hold off or reposition higher.
Real-World Example
Let’s say VIX is 17.5. Divide that by 16, and you get an expected move of about 1.1%. If the S&P 500 closed at 6,300 the prior session, I’m expecting a high-end move to around 6,370 — and a low-end test down to about 6,230.
That’s my working range for the session. I’ll set chart alarms around those levels and look for premium above or below them, depending on direction and flow.
It’s not perfect, but it gives me an objective way to measure what’s likely — and that alone is worth everything in this market.
I’ll see you in the markets.
Chris Pulver
Chris Pulver Trading
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