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Third Eye Market Analyst
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Career Trader/Market Analyst & now Trading Educator Created Fair Volatility Estimate (FVE) Model. FVE calculates "fair value" of VIX using just SPY price data and forecasts trend of VIX. Huge potential for FVE to be incorporated to trading volatility instruments. Sharing my... More
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Third Eye Market Analyst
  • SPY Range-Bound? If Yes, Time To Bet On Short-Term Fall. 0 comments
    Apr 4, 2011 9:29 AM | about stocks: SPY, VXX

    - SPY has rebounded sharply the past 2 weeks. I'm inclined to think that this was a bounce from short-term oversold levels, and not the same continuation of a stampeding bull-market that we have seen since Aug 2010.

    - If I'm right, now is the right time to put on a short-term bearish bet, for example, buying April 133/130 1x2 put spread for under 0.30.

    - FVE indicator's value is at 16.8 and while it's below its moving average, it is significantly above IV Index mean of 14.77% as of Friday's close. So the risk vs reward payout is, I believe, in SPY bears' favor.

    - I do not like to buy VXX (it is better to find opportunitites to sell VXX) but for a short-term trade (few days), I'd look for good entry points to buy VXX intraday, especially under $29.

    Stocks: SPY, VXX
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