VIX Crossing

# VIX Crossing Strategy

## Overview
VIX Crossing is a quantitative trading strategy that combines volatility signals from the VIX index with trend confirmation from the Nasdaq-100 (NDX) to generate long entry signals. The strategy employs multiple exit conditions to manage risk and lock in profits systematically.

## Strategy Logic

### Entry Condition
The strategy initiates a long position when:
- **VIX Crossunder**: The VIX closing price crosses below its 5-bar simple moving average (SMA), signaling a decrease in implied volatility
- **AND NDX Confirmation**: The Nasdaq-100 closes above its 21-bar exponential moving average (EMA), confirming uptrend strength

This dual-signal approach reduces false entries by requiring both volatility normalization and positive market momentum.

### Exit Conditions
The strategy automatically closes positions when any of the following conditions are met:

1. **VIX Crossover (Volatility Exit)**: VIX closes above its SMA, indicating rising volatility
2. **Time-Based Exit**: Position is force-closed after 10 bars from entry, preventing prolonged drawdowns
3. **Take-Profit Exit**: Position closes when unrealized profit exceeds $3,000 per contract
4. **Stop-Loss Exit**: Position closes when unrealized loss exceeds $1,500 per contract

Exit conditions are evaluated each bar while the position is open, with explicit logging of the exit reason for trade analysis.

## Configuration Parameters

| Parameter | Default | Purpose |
|-----------|---------|---------|
| VIX SMA Length | 5 | Smoothing period for VIX volatility baseline |
| NDX EMA Length | 21 | Smoothing period for Nasdaq-100 trend confirmation |
| Force Close After X Bars | 10 | Maximum holding period in bars |
| TP Amount per Contract | $3,000 | Profit target per contract |
| SL Amount per Contract | $1,500 | Loss limit per contract |

## Risk Management Features

- **Position Sizing**: Capital allocation based on profit/loss per contract rather than fixed units, allowing for scalable risk
- **Dual Risk Controls**: Combined time-based and price-based exits prevent extended exposure
- **Profit Asymmetry**: 2:1 profit-to-loss ratio encourages risk/reward discipline
- **Contract-Based Accounting**: Profit targets and stop losses scale with position size

## Capital Requirements

- **Initial Capital**: $50,000
- **Commission**: $3 per contract (cash-based)
- **Instrument**: Designed for index-based derivatives or equities with liquid options markets

## Technical Indicators Used

- Simple Moving Average (SMA) for VIX smoothing
- Exponential Moving Average (EMA) for NDX trend detection
- Crossover/Crossunder detection for signal generation

## Underlying Assumptions

1. VIX crossunder events represent mean-reversion opportunities in Nasdaq-heavy portfolios
2. NDX EMA confirmation filters out uncorrelated volatility spikes
3. 10-bar holding period aligns with typical mean-reversion timeframes
4. Contract-based profit targets accommodate varying leverage levels