Implied Volatility Suite (TG Fork)

The Implied Volatility Suite (TG Fork) indicator provides a comprehensive toolkit for analyzing volatility by calculating implied volatility metrics directly from spot prices using both model-based and model-free approaches. This tool aims to help traders identify periods of market panic and greed through normalized volatility rankings and percentiles.

Usage

The Usage section focuses on how to interpret the two primary volatility calculation methods provided by the script. Traders can choose to display Model-Based IV, VIXfix (Model-Free), or both simultaneously to gauge market sentiment.

• Model-Based Approach: This method typically detects periods of high greed and complacency. It uses log returns and standard deviation to estimate an implied volatility value based on a theoretical option pricing framework.
• VIXfix (Model-Free) Approach: This method is designed to detect "synthetic" volatility peaks, which often coincide with market bottoms and panic selling.
• Volatility Metrics: Users can toggle between raw Implied Volatility, IV Rank (IVR), IV Percentile, or the Volatility Skew Index. For IV Rank and Percentile, values above 50 are generally considered high volatility environments, while values below 50 suggest lower volatility relative to the historical lookback period.

Details

This script is a refactored version of the original Implied Volatility Suite, updated to Pine Script v5 with corrected calculations.

• Model-Free (VIXfix): It replicates the behavior of the VIX by looking at the relationship between the current low and the highest high over a specified period.
• Model-Based: It uses a mathematical model involving standard deviation and log returns to estimate the expected width of price movement over a projected expiry time, then back-calculates the implied volatility (Sigma).
• Volatility Skew Index: This calculation measures the difference between upside and downside volatility components to identify potential directional bias in volatility expectations.

Settings

General Settings

• Calculation of Implied Volatility: Select between 'Model Implied Volatility', 'VixFix', or 'Both'.
• Choose Volatility Data: Determines the output type (Implied Volatility, IV Rank, IV Percentile, or Volatility Skew Index).
• Source: The price source used for calculations (default is Close).

Model Parameters

• Minutes/Hours/Days until expiry: Sets the time horizon for the model-based calculation.
• Model IV Rank/Percentile Length: The lookback period used for normalizing model-based data.
• Interval Width: A multiplier for the standard deviation width in the model.
• Use old method to calculate Model-Based Implied Volatility?: Toggles between the original calculation logic and a revised version.

VIXfix Parameters

• VixFix Length: The primary lookback window for the VIXfix calculation (standard values: 22, 66, etc.).
• VixFix Rank/Percentile Length: The lookback period used for normalizing the VIXfix data.

FAQ

How do I interpret the IV Rank?

The IV Rank scales the current volatility between 0 and 100 based on the highest and lowest values over the selected lookback period. A rank of 100 means the current IV is the highest it has been in the last year (or chosen length).

What is the difference between Model-Based and VIXfix?

Model-based IV attempts to project volatility based on statistical price movement distributions, while VIXfix is a "synthetic" volatility measure that identifies price exhaustion and panic based on local price lows relative to recent highs.

How can I access the Implied Volatility Suite (TG Fork)?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.