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Wednesday, February 25, 2009

Trading the VIX

In looking at the VIX (CBOE Volatility Index), I decided to sell VIX Mar 09 60 calls @.85 in order to capture income from the decaying time value of the options (if the option expires out of the money). Looking at the 3 month VIX chart I see a consolidation pattern with support at 37.34 and resistance at 57.36 (intraday highs and lows within the 3 month chart).

Since I'm looking for where the VIX is not going verses where it is going, I feel the VIX will not be reaching 60 in the near term (less than a month). Given that, selling the VIX at 60 seems like the most reasonable trade.

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