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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: jebj who wrote (9263)	12/16/1998 8:26:00 AM
From: J.B.C.	Respond to of 14162

OK, I'll bite, What's VIX?

To: jebj who wrote (9263)	12/16/1998 11:08:00 AM
From: Herm	Read Replies (3) \| Respond to of 14162

What is The VIX? Personally, I have been watching (through Barron's weekly) and using the VIX as my overall market watcher. In other words, I try to avoid being on the wrong side of sharp market up/down turns or corrections like the recent Oct. 1998 bear market and July 1998 bull market runs. My motto is: "let the trend be your friend!" Barron's does a very nice job of reviewing and warning readers when the VIX is at an extreme. In fact, they usually obtain a statement from the Options Godfather him- self, Larry McMillian for a second opinion. They are right on the money! Here is some more information that I found on the subject. optionsource.com Basically, The Chicago Board Options Exchange Market Volatility Index (ticker symbol – VIX) movements of this "index" can be used to help in short-term OVERVALL market timing. In this article, they attempt to prove claims about this young "indicator" by using an old analysis technique, Bollinger Bands (BB). The BB indicator plus the RSI indicator for me is one of the best timing indicators for individual stocks. 8 of 10 times it is right! Remember! This is more of an art than a science folks! As an oscillating indicator, the VIX generally helps predict OVERALL future market performance by gauging the level of fear in the market following a pullback. A few months ago we were hammering away with Bear Traps (buying PUTs, shorting stock, or selling DEEP in the money CCs as far out as possible) because it was SO EASY to make quick money when the market was dumping. Panic selling created the atmosphere that spooked investors. It was easy to pick them off! My confidence came from the VIX readings that were very low in the beginning and ready for a reversal and major bear market. I knew it was a matter of time before the bear stampede! Of course, that VIX shot up as the damage of the bear market took hold. As pointed out in the above web site, a complete discussion of how the VIX and OEX are related is beyond the scope of this discussion, their research has shown that a generally inverse relationship exists between these two indices. The Bollinger Bands they use are drawn two standard deviations above and below the VIX 21-day moving average. Because the VIX oscillates, a break above the upper band indicates that the index has reached an extreme high and will shortly begin to move in a downward direction. This band break would therefore be a bullish sign (exactly what happened in July with the highest reading EVER!), since the OEX and VIX are inversely related. Conversely, a VIX move below its lower band would have bearish implications (exactly what happened in Oct. 1998). Studies on Overall Market Timing: options-iri.com And Finally, The CBOE has some free info at cboe.com PS - This might be another indicator to add to Doug's web site at webbindustries.com