VIX READY TO DUMP??? WATCH OUT!
Successful investors that have been around for some time have all
learned a common lesson they don't wish to repeat. It goes like
this, "what goes up, eventually comes down real fast in the stock
market arena."
Indeed, one of my favorate critics Michael Santoli, Barron's - THE
STRIKING PRICE, addressed the current VIX level this weekend in weekly
column. The article was entitled, SUMMER OF VIX - Options Index Hits
a Low and Alarms Sound.
In short, he sights the fact that "the major stock-market indexes are
flickering around all-time highs." "The 30-year Treasury yield is
hovering near 6%." "The CBOE VIX - lolls below the key 20-level.
Welcome to July 1998."
The circumstantial evidence stands pretty clear. "As Jay Shartsis'
team at R.F. Lafferty noted last week, the previous three times since
early 1998 that the VIX breached 20, stocks have either consolidated
for a while or sold off. Granted, the indicator hasn't yet repeated
the extreme lows below 17 of last July 17, 1998, but this July and the
last are nonetheless starting to rhyme."
bigcharts.com
You can have the chart of the VIX emailed to you each day from the
BigCharts web site. Not a bad idea!
USING VIX FOR A WINS ADVANTAGE
You would be surprised to learn how many investors don't pay attention
to such indicators like the VIX. They say that, "necessity is the
mother of all inventions!" Well, you can bet your last dollar if the
the CBOE created the VIX it must mean something to the fund managers,
market makers, and serious money. It better mean something to the
small investors like you and I. We are playing against the big guys. I
for one don't want to get in front of that steam roller. I much rather
follow close behind that sucker so I don't get flatten when the
markets flip flop and reverse.
The WINs approach advocates when such pivots do come that you CC at or
deep into the money. You folks know that I tend to prefer going out a
few months to grab bigger CC premies. With options expirations next
Friday, it will be interesting to see if the current upward movement
can be sustained. It seems too good to be true the past two weeks.
Those PUTs are mighty cheap with some stocks. Assertive investors
might want to review some sideshow possibilities for say September
expirations PUTs. |
