NEW BULLISH Plays
iPath S&P 500 VIX ST Futures - VXX - close 17.58 change -0.96 stop 16.60
Target(s): 19.60, 20.40
Key Support/Resistance Areas: 17.50, 19.75, 20.60
Time Frame: 1 to 3 weeks
The S&P 500 VIX Short-Term Futures Index is designed to provide access to equity market volatility through CBOE Volatility Index (the "VIX Index") futures. Specifically, the S&P 500 VIX Short-Term Futures Index offers exposure to a daily rolling long position in the first and second month VIX futures contracts and reflects the implied volatility of the S&P 500 Index at various points along the volatility forward curve. The index futures roll continuously throughout each month from the first month VIX futures contract into the second month VIX futures contract.
Why We Like it:
The market is overbought and needs a healthy pullback to regain its energy. Traders are getting complacent and I believe there will be a spike in volatility in the coming days. VXX printed a new 52-week low today which barely undercut its 4/21 low which was just before the S&P 500 began to sell-off in earnest. This creates a potential double bottom set-up and I suggest readers initiate long positions at current levels. I also view this as a good hedge against our open long positions in the model portfolio. Our profit targets are +11% and +16% from current levels. NOTE: I view this as an aggressive trade so small position size is recommended. Long VXX is a bearish play on equities, however, it is listed as long play because we are long the underlying instrument.
Suggested Position: Long VXX stock at current levels
Options Traders: Buy October $19.00 CALL, current ask $1.00
Entry on September XX
Earnings N/A (unconfirmed)
Average Daily Volume: 21 million
Listed on September 13, 2010