Option Investor
Play Updates

In Play Updates and Reviews

HAVING TROUBLE PRINTING?
Printer friendly version

Call Updates

None
 

Put Updates

Volatility Index - VIX - cls: 46.72 chg: +11.98 stop: n/a

It's been said before but I'll say it again, these are historic times in the stock market. The DJIA just posted a 777-point loss. The S&P 500 index lost 8.8%. The NASDAQ Composite plunged more than 9%. All told the market lost more than 1.3 trillion dollars. Naturally this sort of panic sent the volatility index, aptly named the "fear gauge", to new multi-year highs. The VIX hasn't closed over the 46.00 level since October 2002. This is extremely rare for the VIX to be this high and it never lasts very long. There was one instance where the VIX was over 40 for three or four weeks but it always corrects.

I would use today's spike in the VIX as a new entry point for buying puts. If you like to play blackjack this is where you double down. I'm going to keep track of our VIX play as two different positions. The position we published on September 16th at 30.30 and today, September 29th at 46.72.

I would buy the November puts on the VIX. My first target is 36.00. My second target is 31.00. We're not listing a stop loss. The VIX could spike over 50 but it would only be a temporary spike. Speaking of spikes, if you have intraday access, you might want to wait and see if the VIX does spike near or over 50.00 and then open put option positions.

The first position, entry at 30.30, has a 25.50 target.

Suggested Options:
Buy the November puts.

BUY PUT NOV 35.00 VIX-WI open interest= 318 current ask $7.60
BUY PUT NOV 30.00 VIX-WF open interest=3710 current ask $4.10

Picked on September 16 at = 30.30 first position
Change since picked: +16.42
Picked again Sept. 29 at = 46.72 second position
Changed since picked: -0.00
Earnings Date 00/00/00
Average Daily Volume = --- million
 

Strangle Updates

None
 

Dropped Calls

Stericycle - SRCL - close: 59.61 change: -3.63 stop: 60.99

It should come as no surprise that SRCL was stopped out on market day like today. We were using a relatively tight stop loss to limit our risk. There were expectations for a bailout package over the weekend but they failed to come to fruition. SRCL hit our stop at $60.99 closing the play.

Picked on September 28 at $ 63.24 /stopped out 60.99
Change since picked: - 3.63
Earnings Date 10/23/08 (unconfirmed)
Average Daily Volume = 624 thousand
 

Dropped Puts

None
 

Dropped Strangles

None
 

Play Update Archives