NEW DIRECTIONAL CALL PLAYS
iPath S&P 500 VIX ST Futures - VXX - close 16.79 change +0.06 stop
Target(s): 18.45, 19.25, 20.40
Key Support/Resistance Areas: 17.50, 19.75, 20.60
Time Frame: 1 to 2 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:
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 call play because we are long the underlying instrument.
The market remains overbought and is need of a healthy pullback to regain its energy. Traders are getting complacent as evidenced by VXX printing new 52-week lows multiple times in the past week. I suggest we play for a spike in volatility in the coming days and initiate long positions in VXX at current levels. Our first two targets are +10% and +14% higher from current levels which could happen in a matter of a day or two correction if it is strong enough. If reached, these targets should produce approximately +60% to +80% gains on options positions. I am releasing this play without an initial stop, but will implement one in the next day or two.
Suggested Position: Buy November $18.00 CALL, current ask $1.30
Entry on September XX
Earnings N/A (unconfirmed)
Average Daily Volume: 21 million
Listed on September 21, 2010