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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 & VXX Priced For Perfection? 0 comments
    Mar 26, 2012 9:12 PM | about stocks: VXX, SPY
    1) Meaningful economic indicators every day of the week:
    Tuesday: Consumer confidence
    Wednesday: Durable Goods Orders
    Thursday: Jobless Claims
    Friday: Chicago PMI

    2) According to my Fair Volatility Estimate Model, VIX's fair value is 16.2 and April VIX Futures' fair price is 18.0. (see graph)

    3) Upside skew of VXX also steepend considerably today. The April 16/19 call spread could have been bought for 0.60. That's 3 to 1 should VIX rise to 19, which is not a stretch should the market have even a minor correction.

    I believe SPY & VXX priced for perfection.

    VIX vs Fair Volatility Estimate (<a href='http://seekingalpha.com/symbol/fve' title='Five Star Quality Care, Inc.'>FVE</a>) Model

    Stocks: VXX, SPY
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