Sunday, February 2, 2014

Let's talk about Volatility

As I study my charts on volatility I am seeing good news and bad.  The good news is volatility is reaching extremes on the hourly, 4 hourly, daily and weekly.  The bad news is volatility looks to be moving back up into its long term monthly channel.  2014 will be a traders market, and not the 4 year drone market we witnessed since 2009.

Looking at the charts, if vol does not reverse next week, and it may not (The inverted hammer is interpreted as a reversal candle but more often than not it is a continuation candle, and a cruel one), I think it will by Friday, and to me that means we will see 20 to 30% moves higher in XIV and SVXY, and 40 to 50% down moves in UVXY at minimums.  These reversal have always touched the channel mid point before a move higher, and I am playing this as a normal correction and not yet a full blown decline.  I think that comes later in the month or even March as the SPY tries to make a right shoulder in its attempt to ride higher. I  am wrong if after next Friday the market closes below last weeks low.  I hold 178 Feb puts from a month ago, and been selling weekly 177's against them.

My portfolio is also short with DUST, GASX, QID, and SPXU as a balance against my long term long positions. I
see no reason to make any wholesale changes other than to add to XIV, and watch the gold/miner positions we are in.

On the 13th of February at 2 pm Pacific Time, I am going to hold a paid webinar on trading options.  I will go through four of my favorite strategies of high probability set ups that are easy to understand, watch for, and trade.  $29.95 is the price, and we offer a money back guarantee.  We record the seminar so you can go back and watch it again if you desire. Current Trader level clients enjoy the training for free.  Email us at for more information.

Please enjoy the charts.


  1. Bob it seems xiv has a positive bias over time...? On Oct.15, 2013 the vix was ~ the same price as today but xiv was only $26.26.

    1. Yes, it is because of the contract rolling to keep at a 30 day maturity.