OPEN-SOURCE SCRIPT

Volatility Prism [Nic]

Updated
What is this
The volatility rainbow tracks divergences in a security and its volatility index. This can be used to identify periods of heightened implied (future) risk.

About Volatility
The volatility is calculated by looking at put / call ratios. When VIX goes up it means that puts are outpacing calls. This is a bearish signal.

About Correlation
When the security goes up while the VIX goes up, the divergence on the plot will increase and turn a color. This should be a warning.

Volatility Rainbow
This is a similar indicator, but this one merges all signals into a single line.
Volatility Rainbow [Nic]
Release Notes
What is this
The volatility prism tracks divergences in a security and its volatility index. This can be used to identify periods of heightened implied (future) risk.

About Volatility
The volatility is calculated by looking at put / call ratios. When VIX goes up it means that puts are outpacing calls. This is a bearish signal.

About Correlation
When the security goes up while the VIX goes up, the divergence on the plot will increase and turn a color. This should be a warning.
This index tracks the divergence of SPY/VIX, QQQ/VXN, IWM/RVX, DIA/VXD, GLD/GVZ, SPY/VVIX, SPY/TLT in one index.

Volatility Rainbow
This is a similar indicator, but this one merges all signals into a single line.
Volatility Rainbow [Nic]
Release Notes
Added Weights
Historical Volatility

Open-source script

In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.

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