12/3/2013 VIX

VIX CBOE Market Volatility Index                                      CBOE: VIX 

Previous day        13.78 lo     14.32 hi    14.31 close

      “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 volatilities 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."”

     The current level created 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.

      “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

Long the 13/18/23 Call Butterfly for .65 which was purchased back on 11/25/2013. It closed yesterday at 1.00. Even with a .35 profit which represents roughly a 53% profit on capital risked I believe the market is poised for a much needed pull back I will consider exiting the trade if the VIX get up to the 17 level.

Open Int. (est.)   strike             DEC 13 Monthly (14)

12                                       142,600

13                                       420,490

14                                       523,265

15                                       450,614

16                                       243,390

17                                       224,797

18                                       165,282

19                                         88,525

20                                       124,248

21                                         70,114

22                                       124,442

23                                         71,351

*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 FNRA licensed professional.