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Monday, January 31, 2011

Stay Long SPY Volatility

- Mean implied volatility on SPY options increased to 16.83 from 14.6 on Jan 20th when I recommended to buy volatility. FVE indicator's value rose from 13 to 14.8 during the same time. Although implied volatility is above the FVE indicator's value, the FVE indicator remains above its moving average so I would not yet take profits on long options, long volatility positions.
- All my indicators are pointing to higher probability of SPY correction than they were a week ago, although SPY price trend is still bullish. I feel comfortable in my current options position.

Thursday, January 20, 2011

Time To Buy Volatility

- Fair Volatility Estimate indicator's value is 13, while mean implied volatility on SPY is 14.6. While SPY implied volatility is above FVE indicator's value, I believe one should be looking to buy options and buy volatility because FVE indicator has crossed above its moving average from low levels.
- I would also think that buying the Feb 128/125 put spread and selling Feb 132 call for under 0.30 would be a good trade to put on for a possible correction.

Thursday, January 6, 2011

GLD Position Looking Good

- Most recent push up to 138.72 stopped short of GLD's previous high of 139.11. By Jan 22 expiration, the chance that GLD prices would go above 142 is very small. Now the question is will the Jan 132 puts be in the money by Jan 22 expiration? GLD is testing 133-134 support level once again.

- As for SPY, mean implied Volatility has dropped a point to 15% from 16% as of Monday morning's post. FVE indicator's value is 11.5. According to my indicators, implied volatility remains overvalued.

Monday, January 3, 2011

Implied Volatility High Compared to FVE

-FVE indicator's value is at 12.1, compared to mean implied volatility on SPY options of 16.12, according to IVolatility.com. As I expected last week, market makers would take profits and buy back their short options positions. This is probably the reason why implied volatility has risen over the past week, even though the market had remained quiet and unchanged.

-Some of my indicators are starting to show bullish energy subsiding, and SPY is due for a correction, but I feel implied volatility (although still at low levels) is overvalued.

-I would sell the Jan 22 120/129 strangle for 0.90 or better.