Trade of the Day: VIX Options

by Jon Markman | September 17, 2013 6:30 am

The jumpiness of the broad market, as measured by the S&P 500 Volatility Index (VIX[1]), has declined about 10% in the past week as investors have grown more comfortable with the prospects for a chemical-weapons resolution in the Syria and with the possibility of a modest start to QE3 tapering in the United States.

The underlying S&P 500 Index (SPX[2]) has risen 2% in sync with that lessening of nervousness, as a diminution of fear has led directly to an increase in risk appetites.

The CounterPoint Options quantitative risk model senses that investors may come to regret their lapse of wariness.

As we have seen many times in the past, the value of the “fear index[3]” can change in a heartbeat. One set of bad headlines out of the Middle East — or a trip-up in the communication of Federal Reserve policy this week, when the rate-setting committee convenes to decide whether to begin to wind down QE3 this month — and investors’ nerves will buzz again, sending the VIX shooting higher.

I’ve marked the leading bouts of “VIXplosions” of 2013 on the chart above. It’s important to realize that all of these episodes have appeared out of the blue, with virtually no warning.

Except, well, the CounterPoint Options model has managed to look around the corner and see all of them coming, and helped members exploit them via options — both when the VIX was shooting higher, via calls, and when it was collapsing, with puts.

Recommendation: Buy VIX October $15 calls at current levels. I’m anticipating 35%-40% in upside.

InvestorPlace advisor Jon Markman  writes a daily swing trading newsletter, Trader’s Advantage, which aims to capture profits of 15% to 40% and often as much as 100% to 200% in less than 90 days. 

Professional traders and hedge funds make huge profits off volatility.  Now, Jon’s service CounterPoint Options levels the playing field with the first service geared towards helping individual traders make steady, consistent profits with the VIX.  Get more information on Trader’s Advantage[4] and CounterPoint Options[5] today.

Follow Jon Markman[6] at Google+.

  1. VIX:
  2. SPX:
  3. fear index:
  4. Trader’s Advantage:
  5. CounterPoint Options:
  6. Jon Markman:

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