Two Thoughts for The Day

The spot VIX index has been toying with the 20 level recently.  This used to be considered a pretty high and bearish level for the fear and greed index. The VIX has an inverse correlation with the S&P 500 index and should climb when the overall stock market drops.  Some market watchers always keep an eye on the VIX as an indication of the future near term direction for stocks. With the VIX in the 20’s, this index starts getting a little extra attention.

 

As far as potential option trading goes I’m taking a look at the calendar.  Alcoa (Symbol AA) is the traditional first Dow Jones Industrial Average stock to report their earnings. This will be the traditional beginning of earnings season which kicks off on April 11 for the first quarter of 2011.  Individual option implied volatility usually increases in front of an earnings report with 5 to 6 weeks to before this expansion, market neutral strategies that benefit from an increase in implied volatility may be worth taking a look at.

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Jim Bittman

Mr. Bittman is the author of two books, Options for the Stock Investor, (McGraw-Hill, 1996), and Trading Index Options (McGraw-Hill, 1998). He teaches courses for public and institutional investors, and he has presented several custom courses throughout the U.S., Europe, South America and Southeast Asia. In 1980 Mr. Bittman…