11/5/2013 TUESDAY

VIX CBOE Market Volatility Index                                      CBOE: VIX  Close 12.93

Day low 12.91    Day hi 13.67                   52 week low 11.05    52 week hi 23.23

      “The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilies of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the "investor fear gauge."”

      “VIX values greater than 30 are generally associated with a large amount of volatility as a result of investor fear or uncertainty, while values below 20 generally correspond to less stressful, even complacent, times in the markets.”

VIX - CBOE Volatility Index. Retrieved from http://www.investopedia.com

     The current level is creating a low risk scenario with the markets starting to get nervous as they move into the newly untested heights they are presently at the mid-range over the past year is in the 17.05 range with the spikes reaching into the 18.50 – 19.00 levels and going all the way to 2.45 and 21.91 only twice this year. With 5 peaks already this year, all coming about 2 months a part except for these past two which were about a month apart and the extreme lo’s coming in at the 12.00 level, there is a great chance for a spike going into mid-November to early December. Remember the VIX is a measure of both fear and skepticism which can occur based on simple anticipation as a market falls and as a market rallies too far too fast.

      Look at buying the VIX December 14/21 Call Vertical for 1.00 or better which presents a risk of $100.00 with a potential reward of $500.

      The lower the initial strike the better the chances are of the spread closing in the money by expiration so consider looking at the 12 call strike as well, but base it on risk as well or even buy the initial 14/21 Call Vertical and then adding the 12/21 or 13/21 Call Vertical if Volatility erodes even further. Also remember this is more timing based trade where moving farther out in time may not work similar to futures trades.

Open Int. (est.)   strike             DEC 13 Monthly (43)

12                                       27,600

13                                       36,675

14                                       42,850

15                                       87,475

16                                     158,000

17                                     162,450

18                                     117,100

19                                       66,525

20                                       80,300

21                                       32,250

22                                       53,955

23                                       59,970

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FINRA licensed professional.